There's A Lot To Like About WELLNEO SUGAR's (TSE:2117) Upcoming JP¥46.00 Dividend

It looks like WELLNEO SUGAR Co., Ltd. (TSE:2117) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. Meaning, you will need to purchase WELLNEO SUGAR's shares before the 28th of March to receive the dividend, which will be paid on the 27th of June.

The company's upcoming dividend is JP¥46.00 a share, following on from the last 12 months, when the company distributed a total of JP¥92.00 per share to shareholders. Last year's total dividend payments show that WELLNEO SUGAR has a trailing yield of 3.8% on the current share price of JP¥2396.00. If you buy this business for its dividend, you should have an idea of whether WELLNEO SUGAR's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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. WELLNEO SUGAR is paying out an acceptable 55% of its profit, a common payout level among most companies. 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 distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Check out our latest analysis for WELLNEO SUGAR

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

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 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 WELLNEO SUGAR's earnings per share have risen 12% per annum over the last five years. WELLNEO SUGAR has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

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, WELLNEO SUGAR has lifted its dividend by approximately 16% a year on average. 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

Is WELLNEO SUGAR worth buying for its dividend? WELLNEO SUGAR's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about WELLNEO SUGAR, and we would prioritise taking a closer look at it.

In light of that, while WELLNEO SUGAR has an appealing dividend, it's worth knowing the risks involved with this stock. For example - WELLNEO SUGAR has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.