Is It Smart To Buy ZENKOKU HOSHO Co.,Ltd. (TSE:7164) Before It Goes Ex-Dividend?

ZENKOKU HOSHO Co.,Ltd. (TSE:7164) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase ZENKOKU HOSHOLtd's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 17th of June.

The company's upcoming dividend is JP¥209.00 a share, following on from the last 12 months, when the company distributed a total of JP¥197 per share to shareholders. Looking at the last 12 months of distributions, ZENKOKU HOSHOLtd has a trailing yield of approximately 3.3% on its current stock price of JP¥6056.00. 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! So we need to investigate whether ZENKOKU HOSHOLtd can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately ZENKOKU HOSHOLtd's payout ratio is modest, at just 40% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for ZENKOKU HOSHOLtd

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. To our modest chagrin, ZENKOKU HOSHOLtd earnings per share have been effectively flat over the past year. Growth is a prerequisite for an outstanding dividend company over the long term, but we wouldn't read too much into flat numbers over any one year time frame.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, ZENKOKU HOSHOLtd has lifted its dividend by approximately 10% a year on average.

To Sum It Up

Is ZENKOKU HOSHOLtd worth buying for its dividend? ZENKOKU HOSHOLtd has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating ZENKOKU HOSHOLtd more closely.

Curious what other investors think of ZENKOKU HOSHOLtd? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.