Income Investors Should Know That Kawakami Paint Mfg.Co.,Ltd. (TSE:4616) Goes Ex-Dividend Soon

Kawakami Paint Mfg.Co.,Ltd. (TSE:4616) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Kawakami Paint Mfg.Co.Ltd's shares on or after the 27th of November will not receive the dividend, which will be paid on the 25th of February.

The company's upcoming dividend is JP¥44.00 a share, following on from the last 12 months, when the company distributed a total of JP¥40.00 per share to shareholders. Calculating the last year's worth of payments shows that Kawakami Paint Mfg.Co.Ltd has a trailing yield of 1.7% on the current share price of JP¥2412.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kawakami Paint Mfg.Co.Ltd paid out a comfortable 25% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Kawakami Paint Mfg.Co.Ltd'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.

View our latest analysis for Kawakami Paint Mfg.Co.Ltd

Click here to see how much of its profit Kawakami Paint Mfg.Co.Ltd 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. With that in mind, we're discomforted by Kawakami Paint Mfg.Co.Ltd's 9.7% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Kawakami Paint Mfg.Co.Ltd has lifted its dividend by approximately 7.2% a year on average.

The Bottom Line

Is Kawakami Paint Mfg.Co.Ltd an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Kawakami Paint Mfg.Co.Ltd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Kawakami Paint Mfg.Co.Ltd and you should be aware of these before buying any 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.