Is It Smart To Buy WILLPLUS Holdings Corporation (TSE:3538) Before It Goes Ex-Dividend?

WILLPLUS Holdings Corporation (TSE:3538) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase WILLPLUS Holdings' shares on or after the 27th of December will not receive the dividend, which will be paid on the 11th of March.

The company's next dividend payment will be JP¥17.00 per share, and in the last 12 months, the company paid a total of JP¥45.06 per share. Calculating the last year's worth of payments shows that WILLPLUS Holdings has a trailing yield of 4.5% on the current share price of JP¥998.00. 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 investigate whether WILLPLUS Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for WILLPLUS Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see WILLPLUS Holdings paying out a modest 35% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 20% of its free 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 WILLPLUS Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see WILLPLUS Holdings's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. WILLPLUS Holdings has delivered 23% dividend growth per year on average over the past nine years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has WILLPLUS Holdings got what it takes to maintain its dividend payments? WILLPLUS Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about WILLPLUS Holdings, and we would prioritise taking a closer look at it.

While it's tempting to invest in WILLPLUS Holdings for the dividends alone, you should always be mindful of the risks involved. For example, WILLPLUS Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.