Greenland Resort (TSE:9656) Could Be A Buy For Its Upcoming Dividend

Greenland Resort Company Limited (TSE:9656) stock is about to trade ex-dividend in two days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Greenland Resort's shares before the 27th of June in order to receive the dividend, which the company will pay on the 2nd of September.

The company's upcoming dividend is JP¥5.00 a share, following on from the last 12 months, when the company distributed a total of JP¥13.00 per share to shareholders. Looking at the last 12 months of distributions, Greenland Resort has a trailing yield of approximately 1.9% on its current stock price of JP¥691.00. If you buy this business for its dividend, you should have an idea of whether Greenland Resort's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Greenland Resort

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Greenland Resort's payout ratio is modest, at just 37% of profit. A useful secondary check can be to evaluate whether Greenland Resort generated enough free cash flow to afford its dividend. It distributed 30% 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Greenland Resort, with earnings per share up 5.5% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Greenland Resort has increased its dividend at approximately 5.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Greenland Resort worth buying for its dividend? 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. It might be nice to see earnings growing faster, but Greenland Resort is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Greenland Resort, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Greenland Resort is facing. Every company has risks, and we've spotted 5 warning signs for Greenland Resort (of which 1 is a bit unpleasant!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com