Why You Might Be Interested In Bell-Park Co.,Ltd. (TYO:9441) For Its Upcoming Dividend

It looks like Bell-Park Co.,Ltd. (TYO:9441) is about to go ex-dividend in the next three days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 25th of March.

Bell-ParkLtd's next dividend payment will be JP¥103 per share, on the back of last year when the company paid a total of JP¥122 to shareholders. Based on the last year's worth of payments, Bell-ParkLtd stock has a trailing yield of around 1.7% on the current share price of ¥7020. If you buy this business for its dividend, you should have an idea of whether Bell-ParkLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Bell-ParkLtd

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. Bell-ParkLtd paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether Bell-ParkLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 9.7% of its 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 how much of its profit Bell-ParkLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Bell-ParkLtd's earnings have been skyrocketing, up 24% per annum for the past five years. Bell-ParkLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bell-ParkLtd has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Bell-ParkLtd for the upcoming dividend? Bell-ParkLtd has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Bell-ParkLtd, and we would prioritise taking a closer look at it.

So while Bell-ParkLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 2 warning signs for Bell-ParkLtd (1 is potentially serious) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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