WELLNEO SUGAR Co., Ltd. (TSE:2117) Goes Ex-Dividend Soon

It looks like WELLNEO SUGAR Co., Ltd. (TSE:2117) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase WELLNEO SUGAR's shares before the 29th of September to receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥54.00 per share, on the back of last year when the company paid a total of JP¥108 to shareholders. Based on the last year's worth of payments, WELLNEO SUGAR has a trailing yield of 4.0% on the current stock price of JP¥2672.00. If you buy this business for its dividend, you should have an idea of whether WELLNEO SUGAR's dividend is reliable and sustainable. So we need to investigate whether WELLNEO SUGAR can afford its dividend, and if the dividend could grow.

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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. WELLNEO SUGAR is paying out an acceptable 59% of its profit, a common payout level among most companies. 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. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that WELLNEO SUGAR's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View 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 earnings fall far enough, the company could be forced to cut its dividend. 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. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, WELLNEO SUGAR has increased its dividend at approximately 18% 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

From a dividend perspective, should investors buy or avoid WELLNEO SUGAR? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that WELLNEO SUGAR is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So while WELLNEO SUGAR looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with WELLNEO SUGAR and understanding them should be part of your investment process.

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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.