SPK Corporation (TSE:7466) Looks Interesting, And It's About To Pay A Dividend

It looks like SPK Corporation (TSE:7466) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase SPK's shares before the 27th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's upcoming dividend is JP¥28.00 a share, following on from the last 12 months, when the company distributed a total of JP¥60.00 per share to shareholders. Last year's total dividend payments show that SPK has a trailing yield of 3.0% on the current share price of JP¥2033.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether SPK has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for SPK

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SPK paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether SPK generated enough free cash flow to afford its dividend. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that SPK's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit SPK 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. For this reason, we're glad to see SPK's earnings per share have risen 10% per annum over the last five years. SPK is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, SPK has lifted its dividend by approximately 7.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is SPK worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, SPK paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about SPK, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks SPK is facing. Every company has risks, and we've spotted 1 warning sign for SPK you should know about.

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.