Here's What We Like About Riken Vitamin's (TSE:4526) Upcoming Dividend

Riken Vitamin Co., Ltd. (TSE:4526) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Riken Vitamin's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 5th of December.

The company's upcoming dividend is JP¥40.50 a share, following on from the last 12 months, when the company distributed a total of JP¥81.00 per share to shareholders. Looking at the last 12 months of distributions, Riken Vitamin has a trailing yield of approximately 3.1% on its current stock price of JP¥2617.00. 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! So we need to investigate whether Riken Vitamin can afford its dividend, and if the dividend could grow.

See our latest analysis for Riken Vitamin

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Riken Vitamin paid out a comfortable 29% of its profit last year. 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. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Riken Vitamin'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.

Click here to see how much of its profit Riken Vitamin 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. It's encouraging to see Riken Vitamin has grown its earnings rapidly, up 30% a year for the past five years. Riken Vitamin is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Riken Vitamin has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Riken Vitamin an attractive dividend stock, or better left on the shelf? Riken Vitamin 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. Riken Vitamin looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Riken Vitamin for the dividends alone, you should always be mindful of the risks involved. For example, Riken Vitamin has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.