SALA Corporation (TSE:2734) Stock Goes Ex-Dividend In Just Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that SALA Corporation (TSE:2734) is about to go ex-dividend in just four days. The ex-dividend date is two business days before a company's record date in most cases, 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. This means that investors who purchase SALA's shares on or after the 29th of May will not receive the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥32.00 to shareholders. Based on the last year's worth of payments, SALA has a trailing yield of 3.6% on the current stock price of JP¥899.00. If you buy this business for its dividend, you should have an idea of whether SALA's dividend is reliable and sustainable. As a result, readers should always check whether SALA has been able to grow its dividends, or if the dividend might be cut.

Our free stock report includes 2 warning signs investors should be aware of before investing in SALA. Read for free now.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see SALA paying out a modest 34% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 326% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since SALA is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

SALA paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were SALA to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for SALA

Click here to see how much of its profit SALA 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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see SALA earnings per share are up 2.6% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. SALA has delivered 10% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

Is SALA an attractive dividend stock, or better left on the shelf? SALA delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 326% of its cash flow over the last year, which is a mediocre outcome. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you're not too concerned about SALA's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Be aware that SALA is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

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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.