RACCOON HOLDINGS, Inc. (TSE:3031) Is About To Go Ex-Dividend, And It Pays A 2.6% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that RACCOON HOLDINGS, Inc. (TSE:3031) is about to go ex-dividend in just four 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase RACCOON HOLDINGS' shares on or after the 28th of April, you won't be eligible to receive the dividend, when it is paid on the 29th of July.

The company's next dividend payment will be JP¥12.00 per share, and in the last 12 months, the company paid a total of JP¥22.00 per share. Based on the last year's worth of payments, RACCOON HOLDINGS has a trailing yield of 2.6% on the current stock price of JP¥851.00. 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.

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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. Fortunately RACCOON HOLDINGS's payout ratio is modest, at just 47% of profit. A useful secondary check can be to evaluate whether RACCOON HOLDINGS generated enough free cash flow to afford its dividend. It paid out 97% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

RACCOON HOLDINGS paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to RACCOON HOLDINGS's ability to maintain its dividend.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see RACCOON HOLDINGS earnings per share are up 9.1% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, RACCOON HOLDINGS has lifted its dividend by approximately 32% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is RACCOON HOLDINGS worth buying for its dividend? RACCOON HOLDINGS delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 97% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about RACCOON HOLDINGS from a dividend perspective.

With that being said, if dividends aren't your biggest concern with RACCOON HOLDINGS, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for RACCOON HOLDINGS that you should be aware of before investing in their shares.

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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.