Doshisha Co.,Ltd. (TSE:7483) Looks Interesting, And It's About To Pay A Dividend

Doshisha Co.,Ltd. (TSE:7483) is about to trade ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase DoshishaLtd's shares before the 27th of September to receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥40.00 per share. Last year, in total, the company distributed JP¥80.00 to shareholders. Last year's total dividend payments show that DoshishaLtd has a trailing yield of 3.7% on the current share price of JP¥2162.00. 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 DoshishaLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for DoshishaLtd

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. DoshishaLtd paid out a comfortable 42% of its profit last year. 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. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that DoshishaLtd'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 DoshishaLtd 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. With that in mind, we're encouraged by the steady growth at DoshishaLtd, with earnings per share up 7.9% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

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, DoshishaLtd has lifted its dividend by approximately 10% 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.

Final Takeaway

Should investors buy DoshishaLtd for the upcoming dividend? Earnings per share growth has been growing somewhat, and DoshishaLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but DoshishaLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. DoshishaLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about DoshishaLtd? Here's a visualisation of its historical rate of revenue and earnings growth.

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.