Be Sure To Check Out Create Medic Co., Ltd. (TSE:5187) Before It Goes Ex-Dividend

It looks like Create Medic Co., Ltd. (TSE:5187) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Meaning, you will need to purchase Create Medic's shares before the 27th of December to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥20.00 per share, on the back of last year when the company paid a total of JP¥37.00 to shareholders. Last year's total dividend payments show that Create Medic has a trailing yield of 4.0% on the current share price of JP¥926.00. If you buy this business for its dividend, you should have an idea of whether Create Medic's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Create Medic

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Create Medic's payout ratio is modest, at just 37% of profit. A useful secondary check can be to evaluate whether Create Medic generated enough free cash flow to afford its dividend. Luckily it paid out just 22% 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 Create Medic paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Create Medic earnings per share are up 7.4% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Create Medic has delivered an average of 1.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Has Create Medic got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Create Medic is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Create Medic is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Create Medic, and we would prioritise taking a closer look at it.

While it's tempting to invest in Create Medic for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Create Medic that we strongly recommend you have a look at before investing in the company.

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.