Income Investors Should Know That RACCOON HOLDINGS, Inc. (TSE:3031) 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 RACCOON HOLDINGS, Inc. (TSE:3031) is about to trade ex-dividend in the next day or so. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase RACCOON HOLDINGS' shares on or after the 30th of October will not receive the dividend, which will be paid on the 14th of January.

The company's upcoming dividend is JP¥11.00 a share, following on from the last 12 months, when the company distributed a total of JP¥22.00 per share to shareholders. Based on the last year's worth of payments, RACCOON HOLDINGS stock has a trailing yield of around 3.1% on the current share price of JP¥705.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. RACCOON HOLDINGS paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether RACCOON HOLDINGS generated enough free cash flow to afford its dividend. The company paid out 97% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While RACCOON HOLDINGS's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were RACCOON HOLDINGS to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for RACCOON HOLDINGS

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, RACCOON HOLDINGS's earnings per share have been growing at 11% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. RACCOON HOLDINGS has delivered 26% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is RACCOON HOLDINGS an attractive dividend stock, or better left on the shelf? The best dividend stocks typically boast a long history of growing earnings per share (EPS) via a combination of earnings growth and buybacks. That's why we're glad to see RACCOON HOLDINGS growing its EPS, buying back stock and paying out a reasonable percentage of its earnings as dividends. However, we note with some concern that it paid out 97% of its free cash flow last year, which is uncomfortably high and makes us wonder why the company chose to spend even more cash on buybacks. Overall, it's hard to get excited about RACCOON HOLDINGS from a dividend perspective.

So if you want to do more digging on RACCOON HOLDINGS, you'll find it worthwhile knowing the risks that this stock faces. Be aware that RACCOON HOLDINGS is showing 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

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.