Don't Buy Kuraudia Holdings Co.,Ltd. (TSE:3607) For Its Next Dividend Without Doing These Checks

Readers hoping to buy Kuraudia Holdings Co.,Ltd. (TSE:3607) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Kuraudia HoldingsLtd's shares on or after the 27th of February will not receive the dividend, which will be paid on the 12th of May.

The company's next dividend payment will be JP¥5.00 per share. Last year, in total, the company distributed JP¥10.00 to shareholders. Last year's total dividend payments show that Kuraudia HoldingsLtd has a trailing yield of 3.2% on the current share price of JP¥315.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Kuraudia HoldingsLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Kuraudia HoldingsLtd

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. Kuraudia HoldingsLtd reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Kuraudia HoldingsLtd didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Kuraudia HoldingsLtd paid out more free cash flow than it generated - 128%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Click here to see how much of its profit Kuraudia HoldingsLtd 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Kuraudia HoldingsLtd was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kuraudia HoldingsLtd's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring.

Remember, you can always get a snapshot of Kuraudia HoldingsLtd's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Should investors buy Kuraudia HoldingsLtd for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Bottom line: Kuraudia HoldingsLtd has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Kuraudia HoldingsLtd and want to know more, you'll find it very useful to know what risks this stock faces. Be aware that Kuraudia HoldingsLtd is showing 2 warning signs in our investment analysis, and 1 of those is significant...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.