Should You Buy KEIWA Incorporated (TSE:4251) For Its Upcoming Dividend?

It looks like KEIWA Incorporated (TSE:4251) is about to go ex-dividend in the next 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. Thus, you can purchase KEIWA's shares before the 27th of December in order to receive the dividend, which the company will pay on the 26th of March.

The company's next dividend payment will be JP¥35.00 per share, on the back of last year when the company paid a total of JP¥35.00 to shareholders. Based on the last year's worth of payments, KEIWA stock has a trailing yield of around 3.5% on the current share price of JP¥993.00. If you buy this business for its dividend, you should have an idea of whether KEIWA's dividend is reliable and sustainable. As a result, readers should always check whether KEIWA has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for KEIWA

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. KEIWA is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see KEIWA's earnings have been skyrocketing, up 29% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. KEIWA has delivered an average of 48% per year annual increase in its dividend, based on the past five years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is KEIWA worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

Ever wonder what the future holds for KEIWA? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.