There's A Lot To Like About Idemitsu KosanLtd's (TSE:5019) Upcoming JP¥16.00 Dividend

It looks like Idemitsu Kosan Co.,Ltd. (TSE:5019) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Idemitsu KosanLtd's shares before the 27th of September in order to receive the dividend, which the company will pay on the 9th of December.

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. Last year's total dividend payments show that Idemitsu KosanLtd has a trailing yield of 3.1% on the current share price of JP¥1019.00. If you buy this business for its dividend, you should have an idea of whether Idemitsu KosanLtd's dividend is reliable and sustainable. As a result, readers should always check whether Idemitsu KosanLtd has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Idemitsu KosanLtd

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. Idemitsu KosanLtd is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Idemitsu KosanLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Idemitsu KosanLtd has grown its earnings rapidly, up 21% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Idemitsu KosanLtd looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Idemitsu KosanLtd has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Idemitsu KosanLtd for the upcoming dividend? We love that Idemitsu KosanLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Idemitsu KosanLtd for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Idemitsu KosanLtd (of which 1 is a bit unpleasant!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.