We Wouldn't Be Too Quick To Buy Care Twentyone Corporation (TSE:2373) Before It Goes Ex-Dividend

Readers hoping to buy Care Twentyone Corporation (TSE:2373) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Care Twentyone's shares before the 26th of April in order to receive the dividend, which the company will pay on the 11th of July.

The company's next dividend payment will be JP¥7.00 per share, on the back of last year when the company paid a total of JP¥17.00 to shareholders. Based on the last year's worth of payments, Care Twentyone has a trailing yield of 2.8% on the current stock price of JP¥604.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Care Twentyone has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Care Twentyone

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. Care Twentyone's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Care Twentyone didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Care Twentyone paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Care Twentyone reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Care Twentyone has delivered an average of 9.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on Care Twentyone's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Care Twentyone? It's hard to get used to Care Twentyone paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Care Twentyone is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Care Twentyone and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 4 warning signs for Care Twentyone that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.