Should You Buy KENKO Mayonnaise Co.,Ltd. (TSE:2915) For Its Upcoming Dividend?

Readers hoping to buy KENKO Mayonnaise Co.,Ltd. (TSE:2915) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase KENKO MayonnaiseLtd's shares before the 28th of March in order to receive the dividend, which the company will pay on the 10th of June.

The company's next dividend payment will be JP¥19.00 per share. Last year, in total, the company distributed JP¥38.00 to shareholders. Based on the last year's worth of payments, KENKO MayonnaiseLtd stock has a trailing yield of around 1.9% on the current share price of JP¥1950.00. 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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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. KENKO MayonnaiseLtd is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 9.2% of its free cash flow in the last year.

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 KENKO MayonnaiseLtd

Click here to see how much of its profit KENKO MayonnaiseLtd 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see KENKO MayonnaiseLtd's earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, KENKO MayonnaiseLtd has lifted its dividend by approximately 5.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because KENKO MayonnaiseLtd is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid KENKO MayonnaiseLtd? KENKO MayonnaiseLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for KENKO MayonnaiseLtd (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

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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.