Here's What We Like About Unicharm's (TSE:8113) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Unicharm Corporation (TSE:8113) is about to go ex-dividend in just three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Unicharm's shares before the 27th of December in order to receive the dividend, which the company will pay on the 7th of March.

The company's next dividend payment will be JP¥22.00 per share, on the back of last year when the company paid a total of JP¥44.00 to shareholders. Calculating the last year's worth of payments shows that Unicharm has a trailing yield of 1.1% on the current share price of JP¥3965.00. If you buy this business for its dividend, you should have an idea of whether Unicharm's dividend is reliable and sustainable. As a result, readers should always check whether Unicharm has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Unicharm

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Unicharm's payout ratio is modest, at just 29% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 22% of its free cash flow last year.

It's positive to see that Unicharm'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Unicharm, with earnings per share up 6.8% on average 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. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Unicharm has increased its dividend at approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Unicharm for the upcoming dividend? Earnings per share growth has been growing somewhat, and Unicharm 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 Unicharm is being conservative with its dividend payouts and could still perform reasonably over the long run. Unicharm looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Unicharm? See what the 10 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.