Santen Pharmaceutical Co., Ltd. (TSE:4536) Will Pay A JP¥17.00 Dividend In Three Days

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 Santen Pharmaceutical Co., Ltd. (TSE:4536) is about to go ex-dividend in just 3 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 Santen Pharmaceutical's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 2nd of December.

The company's next dividend payment will be JP¥17.00 per share, and in the last 12 months, the company paid a total of JP¥34.00 per share. Calculating the last year's worth of payments shows that Santen Pharmaceutical has a trailing yield of 1.9% on the current share price of JP¥1756.00. 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.

Check out our latest analysis for Santen Pharmaceutical

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 Santen Pharmaceutical paying out a modest 45% of its earnings. 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. Luckily it paid out just 16% of its free cash flow 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.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Santen Pharmaceutical's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Santen Pharmaceutical has delivered an average of 5.4% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Should investors buy Santen Pharmaceutical for the upcoming dividend? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Santen Pharmaceutical you should know about.

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.