Just Three Days Till Dentsu Group Inc. (TSE:4324) Will Be Trading Ex-Dividend

It looks like Dentsu Group Inc. (TSE:4324) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Dentsu 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 14th of March.

The company's next dividend payment will be JP¥69.75 per share. Last year, in total, the company distributed JP¥131 to shareholders. Calculating the last year's worth of payments shows that Dentsu Group has a trailing yield of 3.5% on the current share price of JP¥3943.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Dentsu Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dentsu Group 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 Dentsu Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 82% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Dentsu Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Dentsu 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.

Remember, you can always get a snapshot of Dentsu Group's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Dentsu Group worth buying for its dividend? It's hard to get used to Dentsu Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that being said, if dividends aren't your biggest concern with Dentsu Group, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for Dentsu Group 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.