Should Income Investors Look At Sumitomo Metal Mining Co., Ltd. (TSE:5713) Before Its Ex-Dividend?

Sumitomo Metal Mining Co., Ltd. (TSE:5713) stock is about to trade ex-dividend in 3 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 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. In other words, investors can purchase Sumitomo Metal Mining's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be JP¥49.00 per share. Last year, in total, the company distributed JP¥99.00 to shareholders. Looking at the last 12 months of distributions, Sumitomo Metal Mining has a trailing yield of approximately 2.5% on its current stock price of JP¥3914.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Sumitomo Metal Mining has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Sumitomo Metal Mining

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. That's why it's good to see Sumitomo Metal Mining paying out a modest 45% of its earnings. 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. It paid out more than half (53%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Sumitomo Metal Mining'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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Sumitomo Metal Mining's earnings per share have been shrinking at 2.1% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sumitomo Metal Mining has delivered an average of 3.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Has Sumitomo Metal Mining got what it takes to maintain its dividend payments? Earnings per share have fallen significantly, although at least Sumitomo Metal Mining paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Sumitomo Metal Mining's dividend merits.

If you're not too concerned about Sumitomo Metal Mining's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 2 warning signs for Sumitomo Metal Mining 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.