Itochu Enex Co.,Ltd. (TSE:8133) Looks Interesting, And It's About To Pay A Dividend

Itochu Enex Co.,Ltd. (TSE:8133) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Itochu EnexLtd's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 20th of June.

The company's next dividend payment will be JP¥30.00 per share, and in the last 12 months, the company paid a total of JP¥60.00 per share. Last year's total dividend payments show that Itochu EnexLtd has a trailing yield of 3.6% on the current share price of JP¥1664.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Itochu EnexLtd 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. That's why it's good to see Itochu EnexLtd paying out a modest 43% of its earnings. 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. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

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.

See our latest analysis for Itochu EnexLtd

Click here to see how much of its profit Itochu EnexLtd paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Itochu EnexLtd, with earnings per share up 4.8% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Itochu EnexLtd has lifted its dividend by approximately 11% a year on average. 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.

The Bottom Line

Is Itochu EnexLtd an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Itochu EnexLtd 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Itochu EnexLtd is halfway there. It's a promising combination that should mark this company worthy of closer attention.

Curious about whether Itochu EnexLtd has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.