Sankyo Frontier Co.,Ltd. (TSE:9639) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sankyo Frontier Co.,Ltd. (TSE:9639) 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Sankyo FrontierLtd's shares on or after the 29th of September will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥40.00 per share. Last year, in total, the company distributed JP¥85.00 to shareholders. Last year's total dividend payments show that Sankyo FrontierLtd has a trailing yield of 4.1% on the current share price of JP¥2055.00. If you buy this business for its dividend, you should have an idea of whether Sankyo FrontierLtd's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Sankyo FrontierLtd paid out a comfortable 39% of its profit last year. 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. Over the last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Sankyo FrontierLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Sankyo FrontierLtd

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Sankyo FrontierLtd's earnings per share have remained 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 per share growth has been slim, and the company is already paying out a majority 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. Since the start of our data, 10 years ago, Sankyo FrontierLtd has lifted its dividend by approximately 11% a year on average.

To Sum It Up

Should investors buy Sankyo FrontierLtd for the upcoming dividend? Earnings per share have been flat over the 10-year timeframe we consider, and Sankyo FrontierLtd paid out less than half its earnings and more than half its free cashflow over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Sankyo FrontierLtd's dividend merits.

In light of that, while Sankyo FrontierLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Sankyo FrontierLtd has 2 warning signs (and 1 which can't be ignored) we think 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.