Daito Trust Construction Co.,Ltd. (TSE:1878) Stock Goes Ex-Dividend In Just Three Days

Readers hoping to buy Daito Trust Construction Co.,Ltd. (TSE:1878) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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. In other words, investors can purchase Daito Trust ConstructionLtd's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 18th of November.

The company's upcoming dividend is JP¥287.00 a share, following on from the last 12 months, when the company distributed a total of JP¥575 per share to shareholders. Looking at the last 12 months of distributions, Daito Trust ConstructionLtd has a trailing yield of approximately 3.3% on its current stock price of JP¥17520.00. 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 Daito Trust ConstructionLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Daito Trust ConstructionLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Daito Trust ConstructionLtd's payout ratio is modest, at just 46% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

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 earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Daito Trust ConstructionLtd's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Daito Trust ConstructionLtd has delivered 5.3% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Daito Trust ConstructionLtd for the upcoming dividend? Daito Trust ConstructionLtd has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

Ever wonder what the future holds for Daito Trust ConstructionLtd? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.