There's A Lot To Like About KowaLtd's (TSE:7807) Upcoming JP¥12.00 Dividend

Kowa Co.,Ltd. (TSE:7807) stock is about to trade ex-dividend in three 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. 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. Meaning, you will need to purchase KowaLtd's shares before the 27th of February to receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be JP¥12.00 per share, and in the last 12 months, the company paid a total of JP¥12.00 per share. Based on the last year's worth of payments, KowaLtd has a trailing yield of 1.4% on the current stock price of JP¥859.00. If you buy this business for its dividend, you should have an idea of whether KowaLtd's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for KowaLtd

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. KowaLtd has a low and conservative payout ratio of just 6.4% of its income after tax. A useful secondary check can be to evaluate whether KowaLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 5.6% 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 KowaLtd 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. That's why it's comforting to see KowaLtd's earnings have been skyrocketing, up 46% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, KowaLtd looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. KowaLtd has seen its dividend decline 1.1% per annum on average over the past seven years, which is not great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid KowaLtd? It's great that KowaLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. KowaLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks KowaLtd is facing. For example, we've found 1 warning sign for KowaLtd that we recommend you consider before investing in the business.

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.