Shikoku Kasei Holdings Corporation (TSE:4099) Looks Interesting, And It's About To Pay A Dividend

Shikoku Kasei Holdings Corporation (TSE:4099) is about to trade ex-dividend in the next three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Shikoku Kasei Holdings' shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 7th of March.

The company's upcoming dividend is JP¥25.00 a share, following on from the last 12 months, when the company distributed a total of JP¥50.00 per share to shareholders. Based on the last year's worth of payments, Shikoku Kasei Holdings has a trailing yield of 2.5% on the current stock price of JP¥2007.00. If you buy this business for its dividend, you should have an idea of whether Shikoku Kasei Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Shikoku Kasei Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Shikoku Kasei 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. Shikoku Kasei Holdings is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Shikoku Kasei 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 how much of its profit Shikoku Kasei Holdings 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Shikoku Kasei Holdings's earnings per share have risen 10% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shikoku Kasei Holdings has delivered 15% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Shikoku Kasei Holdings for the upcoming dividend? We love that Shikoku Kasei Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Shikoku Kasei Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Shikoku Kasei Holdings has 1 warning sign we think 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.