There's A Lot To Like About ENEOS Holdings' (TSE:5020) Upcoming JP¥11.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ENEOS Holdings, Inc. (TSE:5020) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase ENEOS Holdings' shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 2nd of December.

The company's next dividend payment will be JP¥11.00 per share, on the back of last year when the company paid a total of JP¥22.00 to shareholders. Based on the last year's worth of payments, ENEOS Holdings has a trailing yield of 2.8% on the current stock price of JP¥788.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for ENEOS Holdings

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. ENEOS Holdings paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 11% of its free cash flow as dividends last year, which is conservatively low.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at ENEOS Holdings, with earnings per share up 3.6% on average over the last five years. ENEOS Holdings is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ENEOS Holdings has delivered 3.2% 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.

Final Takeaway

Is ENEOS Holdings worth buying for its dividend? Earnings per share growth has been growing somewhat, and ENEOS Holdings 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 ENEOS Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. ENEOS Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks ENEOS Holdings is facing. Our analysis shows 2 warning signs for ENEOS Holdings that we strongly recommend you have a look at before investing in the company.

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.