Cosmo Energy Holdings Co., Ltd. (TSE:5021) Is About To Go Ex-Dividend, And It Pays A 4.5% Yield

Cosmo Energy Holdings Co., Ltd. (TSE:5021) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Cosmo Energy Holdings' shares before the 29th of September in order to receive the dividend, which the company will pay on the 15th of December.

The company's next dividend payment will be JP¥150.00 per share. Last year, in total, the company distributed JP¥330 to shareholders. Calculating the last year's worth of payments shows that Cosmo Energy Holdings has a trailing yield of 4.5% on the current share price of JP¥7283.00. If you buy this business for its dividend, you should have an idea of whether Cosmo Energy Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Cosmo Energy Holdings has been able to grow its dividends, or if the dividend might be cut.

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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. Its dividend payout ratio is 90% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Cosmo Energy Holdings generated enough free cash flow to afford its dividend. Dividends consumed 58% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

View our latest analysis for Cosmo Energy Holdings

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Cosmo Energy Holdings, with earnings per share up 4.0% on average over the last five years. A payout ratio of 90% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cosmo Energy Holdings has delivered an average of 23% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has Cosmo Energy Holdings got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about Cosmo Energy Holdings from a dividend perspective.

If you're not too concerned about Cosmo Energy Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 4 warning signs for Cosmo Energy Holdings and you should be aware of these before buying any shares.

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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.