Kikkoman Corporation (TSE:2801) Passed Our Checks, And It's About To Pay A JP¥10.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kikkoman Corporation (TSE:2801) is about to trade ex-dividend in the next four 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. 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. Accordingly, Kikkoman investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be JP¥10.00 per share. Last year, in total, the company distributed JP¥25.00 to shareholders. Based on the last year's worth of payments, Kikkoman stock has a trailing yield of around 1.9% on the current share price of JP¥1294.00. If you buy this business for its dividend, you should have an idea of whether Kikkoman's dividend is reliable and sustainable. As a result, readers should always check whether Kikkoman 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. Kikkoman paid out a comfortable 37% of its profit last year. A useful secondary check can be to evaluate whether Kikkoman generated enough free cash flow to afford its dividend. It paid out more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Kikkoman'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.

Check out our latest analysis for Kikkoman

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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Kikkoman's earnings per share have been growing at 18% a year for the past five years. Kikkoman is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some 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. Kikkoman has delivered an average of 18% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Kikkoman worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Kikkoman, and we would prioritise taking a closer look at it.

Curious what other investors think of Kikkoman? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.

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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.