Is It Smart To Buy SUNNY SIDE UP GROUP Inc. (TSE:2180) Before It Goes Ex-Dividend?

SUNNY SIDE UP GROUP Inc. (TSE:2180) stock is about to trade ex-dividend in three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase SUNNY SIDE UP GROUP's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 11th of March.

The company's next dividend payment will be JP¥7.00 per share. Last year, in total, the company distributed JP¥22.00 to shareholders. Last year's total dividend payments show that SUNNY SIDE UP GROUP has a trailing yield of 4.0% on the current share price of JP¥551.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for SUNNY SIDE UP GROUP

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see SUNNY SIDE UP GROUP paying out a modest 36% of its earnings. 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. It paid out more than half (57%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that SUNNY SIDE UP GROUP'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 how much of its profit SUNNY SIDE UP GROUP paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see SUNNY SIDE UP GROUP's earnings per share have risen 11% per annum over the last five years. SUNNY SIDE UP GROUP has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

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, SUNNY SIDE UP GROUP has lifted its dividend by approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is SUNNY SIDE UP GROUP an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, SUNNY SIDE UP GROUP paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while SUNNY SIDE UP GROUP has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with SUNNY SIDE UP GROUP and understanding them should be part of your investment process.

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.