Don't Buy LIFULL Co.,Ltd. (TSE:2120) For Its Next Dividend Without Doing These Checks

It looks like LIFULL Co.,Ltd. (TSE:2120) is about to go ex-dividend in the next three days. The ex-dividend date is one business day 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 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. Accordingly, LIFULLLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 23rd of December.

The company's next dividend payment will be JP¥0.50 per share, and in the last 12 months, the company paid a total of JP¥4.26 per share. Based on the last year's worth of payments, LIFULLLtd has a trailing yield of 3.1% on the current stock price of JP¥139.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for LIFULLLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. LIFULLLtd reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit LIFULLLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. LIFULLLtd reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, LIFULLLtd has lifted its dividend by approximately 9.9% a year on average.

Get our latest analysis on LIFULLLtd's balance sheet health here.

Final Takeaway

Has LIFULLLtd got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of LIFULLLtd.

With that being said, if you're still considering LIFULLLtd as an investment, you'll find it beneficial to know what risks this stock is facing. Case in point: We've spotted 1 warning sign for LIFULLLtd you should be aware of.

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.