Be Sure To Check Out Rentracks CO.,LTD. (TSE:6045) Before It Goes Ex-Dividend

Rentracks CO.,LTD. (TSE:6045) is about to trade ex-dividend in the next 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, RentracksLTD investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥12.00 per share, on the back of last year when the company paid a total of JP¥24.00 to shareholders. Looking at the last 12 months of distributions, RentracksLTD has a trailing yield of approximately 1.4% on its current stock price of JP¥1702.00. If you buy this business for its dividend, you should have an idea of whether RentracksLTD's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. RentracksLTD paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 11% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for RentracksLTD

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see RentracksLTD has grown its earnings rapidly, up 66% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, RentracksLTD looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, RentracksLTD has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has RentracksLTD got what it takes to maintain its dividend payments? We love that RentracksLTD is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while RentracksLTD has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for RentracksLTD and you should be aware of these before buying any shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.