Hoshi Iryo-Sanki Co., Ltd. (TSE:7634) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Hoshi Iryo-Sanki Co., Ltd. (TSE:7634) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Hoshi Iryo-Sanki's shares before the 27th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's next dividend payment will be JP¥35.00 per share, on the back of last year when the company paid a total of JP¥70.00 to shareholders. Based on the last year's worth of payments, Hoshi Iryo-Sanki has a trailing yield of 1.7% on the current stock price of JP¥4215.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Hoshi Iryo-Sanki

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hoshi Iryo-Sanki has a low and conservative payout ratio of just 14% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 9.4% of its 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 Hoshi Iryo-Sanki 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. Fortunately for readers, Hoshi Iryo-Sanki's earnings per share have been growing at 10% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hoshi Iryo-Sanki has delivered an average of 5.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Hoshi Iryo-Sanki is keeping back more of its profits to grow the business.

To Sum It Up

Should investors buy Hoshi Iryo-Sanki for the upcoming dividend? Hoshi Iryo-Sanki 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.

So while Hoshi Iryo-Sanki looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Hoshi Iryo-Sanki and you should be aware of this before buying any 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.