Don't Buy Japan Property Management Center Co.,Ltd. (TSE:3276) For Its Next Dividend Without Doing These Checks

Japan Property Management Center Co.,Ltd. (TSE:3276) is about to trade ex-dividend in the next 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. 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. Therefore, if you purchase Japan Property Management CenterLtd's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 9th of September.

The company's next dividend payment will be JP¥27.50 per share, on the back of last year when the company paid a total of JP¥55.00 to shareholders. Last year's total dividend payments show that Japan Property Management CenterLtd has a trailing yield of 4.6% on the current share price of JP¥1208.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Japan Property Management CenterLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Japan Property Management CenterLtd paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 81% 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.

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 how much of its profit Japan Property Management CenterLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Japan Property Management CenterLtd's earnings are down 2.7% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Japan Property Management CenterLtd has delivered 16% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Is Japan Property Management CenterLtd worth buying for its dividend? While earnings per share are shrinking, it's encouraging to see that at least Japan Property Management CenterLtd's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

So if you're still interested in Japan Property Management CenterLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. In terms of investment risks, we've identified 1 warning sign with Japan Property Management CenterLtd and understanding them should be part of your investment process.

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.

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