Interested In Resonac Holdings' (TSE:4004) Upcoming JP¥65.00 Dividend? You Have Three Days Left

Resonac Holdings Corporation (TSE:4004) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Resonac Holdings' shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 27th of March.

The company's upcoming dividend is JP¥65.00 a share, following on from the last 12 months, when the company distributed a total of JP¥65.00 per share to shareholders. Last year's total dividend payments show that Resonac Holdings has a trailing yield of 1.6% on the current share price of JP¥4075.00. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Resonac Holdings

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. Resonac Holdings paid out a comfortable 31% 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. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's positive to see that Resonac Holdings'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 shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Resonac Holdings's earnings per share have fallen at approximately 23% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Resonac Holdings has lifted its dividend by approximately 8.0% a year on average.

The Bottom Line

Should investors buy Resonac Holdings for the upcoming dividend? Resonac Holdings 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. To summarise, Resonac Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Resonac Holdings for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Resonac Holdings (1 is concerning) 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.