Greenland Resort Company Limited (TSE:9656) Passed Our Checks, And It's About To Pay A JP¥8.00 Dividend

Readers hoping to buy Greenland Resort Company Limited (TSE:9656) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Greenland Resort's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be JP¥8.00 per share, and in the last 12 months, the company paid a total of JP¥13.00 per share. Looking at the last 12 months of distributions, Greenland Resort has a trailing yield of approximately 2.1% on its current stock price of JP¥620.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Greenland Resort

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Greenland Resort's payout ratio is modest, at just 27% of profit. A useful secondary check can be to evaluate whether Greenland Resort generated enough free cash flow to afford its dividend. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Greenland Resort paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Greenland Resort earnings per share are up 2.5% per annum over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Greenland Resort has increased its dividend at approximately 6.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Greenland Resort got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Greenland Resort is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Greenland Resort is halfway there. Greenland Resort looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Greenland Resort has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 5 warning signs we've spotted with Greenland Resort (including 1 which is potentially serious).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.