We Wouldn't Be Too Quick To Buy Kirin Holdings Company, Limited (TSE:2503) Before It Goes Ex-Dividend

Kirin Holdings Company, Limited (TSE:2503) stock is about to trade ex-dividend in 3 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. 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. Therefore, if you purchase Kirin Holdings Company's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 5th of September.

The company's next dividend payment will be JP¥37.00 per share. Last year, in total, the company distributed JP¥74.00 to shareholders. Based on the last year's worth of payments, Kirin Holdings Company has a trailing yield of 3.6% on the current stock price of JP¥2037.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Kirin Holdings Company paid out 102% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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 an unsustainably high 326% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Kirin Holdings Company is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

As Kirin Holdings Company's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.

Check out our latest analysis for Kirin Holdings Company

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Kirin Holdings Company's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Minimal earnings growth, combined with concerningly high payout ratios suggests that Kirin Holdings Company is unlikely to grow the dividend much in future, and indeed the payment could be vulnerable to a cut.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kirin Holdings Company has delivered an average of 6.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is Kirin Holdings Company worth buying for its dividend? Earnings per share are effectively flat, plus Kirin Holdings Company's dividend is not well covered by either earnings or cash flow, which is not great. It's not that we think Kirin Holdings Company is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Kirin Holdings Company and want to know more, you'll find it very useful to know what risks this stock faces. To that end, you should learn about the 4 warning signs we've spotted with Kirin Holdings Company (including 1 which is significant).

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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.