Here's What We Like About CK SAN-ETSU's (TSE:5757) Upcoming Dividend

Readers hoping to buy CK SAN-ETSU Co., Ltd. (TSE:5757) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase CK SAN-ETSU's shares before the 28th of March in order to receive the dividend, which the company will pay on the 30th of June.

The company's next dividend payment will be JP¥45.00 per share. Last year, in total, the company distributed JP¥90.00 to shareholders. Looking at the last 12 months of distributions, CK SAN-ETSU has a trailing yield of approximately 2.1% on its current stock price of JP¥4270.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether CK SAN-ETSU has been able to grow its dividends, or if the dividend might be cut.

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. CK SAN-ETSU has a low and conservative payout ratio of just 6.4% of its income after tax. A useful secondary check can be to evaluate whether CK SAN-ETSU generated enough free cash flow to afford its dividend. The good news is it paid out just 18% of its free cash flow in the last year.

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.

See our latest analysis for CK SAN-ETSU

Click here to see how much of its profit CK SAN-ETSU paid out over the last 12 months.

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. With that in mind, we're encouraged by the steady growth at CK SAN-ETSU, with earnings per share up 5.8% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

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, eight years ago, CK SAN-ETSU has lifted its dividend by approximately 21% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid CK SAN-ETSU? Earnings per share growth has been growing somewhat, and CK SAN-ETSU is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but CK SAN-ETSU is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while CK SAN-ETSU has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for CK SAN-ETSU and you should be aware of these before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.