Here's What We Like About STI Foods HoldingsInc's (TSE:2932) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see STI Foods Holdings,Inc. (TSE:2932) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase STI Foods HoldingsInc's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 11th of March.

The company's upcoming dividend is JP¥80.00 a share, following on from the last 12 months, when the company distributed a total of JP¥160 per share to shareholders. Calculating the last year's worth of payments shows that STI Foods HoldingsInc has a trailing yield of 3.3% on the current share price of JP¥4890.00. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for STI Foods HoldingsInc

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. STI Foods HoldingsInc paid out a comfortable 33% of its profit last year. 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. Luckily it paid out just 17% of its free cash flow 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.

Click here to see how much of its profit STI Foods HoldingsInc paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see STI Foods HoldingsInc's earnings have been skyrocketing, up 27% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. STI Foods HoldingsInc has delivered 41% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has STI Foods HoldingsInc got what it takes to maintain its dividend payments? STI Foods HoldingsInc has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in STI Foods HoldingsInc for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for STI Foods HoldingsInc that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.