Cosmo Energy Holdings Co., Ltd. (TSE:5021) Passed Our Checks, And It's About To Pay A JP¥150.00 Dividend

Cosmo Energy Holdings Co., Ltd. (TSE:5021) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Cosmo Energy Holdings investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be JP¥150.00 per share, on the back of last year when the company paid a total of JP¥300 to shareholders. Based on the last year's worth of payments, Cosmo Energy Holdings stock has a trailing yield of around 3.8% on the current share price of JP¥7863.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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.

See our latest analysis for Cosmo Energy Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Cosmo Energy Holdings has a low and conservative payout ratio of just 25% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 20% 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Cosmo Energy Holdings's earnings per share have risen 14% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Cosmo Energy Holdings has lifted its dividend by approximately 22% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Cosmo Energy Holdings an attractive dividend stock, or better left on the shelf? Cosmo Energy Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Cosmo Energy Holdings for the dividends alone, you should always be mindful of the risks involved. We've identified 2 warning signs with Cosmo Energy Holdings (at least 1 which is significant), and understanding them should be part of your investment process.

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.