Why You Might Be Interested In Kuraray Co., Ltd. (TSE:3405) For Its 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 Kuraray Co., Ltd. (TSE:3405) is about to go ex-dividend in just 3 days. 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 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. Meaning, you will need to purchase Kuraray's shares before the 27th of December to receive the dividend, which will be paid on the 28th of March.

The company's next dividend payment will be JP¥27.00 per share. Last year, in total, the company distributed JP¥54.00 to shareholders. Calculating the last year's worth of payments shows that Kuraray has a trailing yield of 2.5% on the current share price of JP¥2183.50. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Kuraray

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. That's why it's good to see Kuraray paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Kuraray generated enough free cash flow to afford its dividend. Luckily it paid out just 22% of its free cash flow last year.

It's positive to see that Kuraray'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?

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. Fortunately for readers, Kuraray's earnings per share have been growing at 11% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kuraray has delivered 4.1% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Kuraray is keeping back more of its profits to grow the business.

To Sum It Up

Should investors buy Kuraray for the upcoming dividend? Kuraray has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Kuraray looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Kuraray looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Kuraray that you should be aware of before investing in their shares.

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.