There's A Lot To Like About SUNNY SIDE UP GROUP's (TSE:2180) Upcoming JP¥15.00 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that SUNNY SIDE UP GROUP Inc. (TSE:2180) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase SUNNY SIDE UP GROUP's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 26th of September.

The company's upcoming dividend is JP¥15.00 a share, following on from the last 12 months, when the company distributed a total of JP¥22.00 per share to shareholders. Looking at the last 12 months of distributions, SUNNY SIDE UP GROUP has a trailing yield of approximately 4.0% on its current stock price of JP¥547.00. If you buy this business for its dividend, you should have an idea of whether SUNNY SIDE UP GROUP's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately SUNNY SIDE UP GROUP's payout ratio is modest, at just 47% of profit. A useful secondary check can be to evaluate whether SUNNY SIDE UP GROUP generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.

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.

Check out our latest analysis for SUNNY SIDE UP GROUP

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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see SUNNY SIDE UP GROUP earnings per share are up 7.0% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. SUNNY SIDE UP GROUP has delivered 16% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has SUNNY SIDE UP GROUP got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and SUNNY SIDE UP GROUP 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and SUNNY SIDE UP GROUP is halfway there. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks SUNNY SIDE UP GROUP is facing. Case in point: We've spotted 3 warning signs for SUNNY SIDE UP GROUP you should be aware of.

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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.