cotta CO.,LTD (TSE:3359) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy cotta CO.,LTD (TSE:3359) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase cottaLTD's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 25th of December.

The company's next dividend payment will be JP¥8.00 per share, and in the last 12 months, the company paid a total of JP¥8.00 per share. Based on the last year's worth of payments, cottaLTD has a trailing yield of 2.1% on the current stock price of JP¥388.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether cottaLTD has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for cottaLTD

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. cottaLTD has a low and conservative payout ratio of just 20% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 6.9% of its free cash flow last year.

It's positive to see that cottaLTD'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 how much of its profit cottaLTD 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see cottaLTD earnings per share are up 4.6% per annum over the last five years. cottaLTD is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, cottaLTD has lifted its dividend by approximately 17% 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.

To Sum It Up

Should investors buy cottaLTD for the upcoming dividend? Earnings per share growth has been growing somewhat, and cottaLTD 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 cottaLTD is being conservative with its dividend payouts and could still perform reasonably over the long run. cottaLTD 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 cottaLTD is facing. For example - cottaLTD has 1 warning sign we think you should be aware of.

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.