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

Dentsu Group Inc. (TSE:4324) stock is about to trade ex-dividend in three days. 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. Meaning, you will need to purchase Dentsu Group's shares before the 27th of June to receive the dividend, which will be paid on the 12th of September.

The company's next dividend payment will be JP¥69.75 per share, and in the last 12 months, the company paid a total of JP¥139 per share. Looking at the last 12 months of distributions, Dentsu Group has a trailing yield of approximately 4.4% on its current stock price of JP¥3185.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Dentsu Group can afford its dividend, and if the dividend could grow.

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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. Dentsu Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

View our latest analysis for Dentsu Group

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dentsu Group has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments.

We update our analysis on Dentsu Group every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Dentsu Group got what it takes to maintain its dividend payments? 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. In summary, while it has some positive characteristics, we're not inclined to race out and buy Dentsu Group today.

However if you're still interested in Dentsu Group as a potential investment, you should definitely consider some of the risks involved with Dentsu Group. For example - Dentsu Group has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.