Just Two Days Till Kyowa Leather Cloth Co., Ltd. (TSE:3553) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kyowa Leather Cloth Co., Ltd. (TSE:3553) is about to trade ex-dividend in the next 2 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Kyowa Leather Cloth's shares before the 28th of March to receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be JP¥14.00 per share, and in the last 12 months, the company paid a total of JP¥24.00 per share. Based on the last year's worth of payments, Kyowa Leather Cloth has a trailing yield of 2.9% on the current stock price of JP¥840.00. 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 investigate whether Kyowa Leather Cloth can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Kyowa Leather Cloth

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kyowa Leather Cloth paid out a comfortable 43% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

It's positive to see that Kyowa Leather Cloth'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 Kyowa Leather Cloth paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Kyowa Leather Cloth's earnings per share have been shrinking at 4.4% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Kyowa Leather Cloth has lifted its dividend by approximately 17% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kyowa Leather Cloth? Kyowa Leather Cloth has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Kyowa Leather Cloth from a dividend perspective.

In light of that, while Kyowa Leather Cloth has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Kyowa Leather Cloth (1 is significant) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.