Sanyei Corporation (TSE:8119) Looks Interesting, And It's About To Pay A Dividend

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 Sanyei Corporation (TSE:8119) is about to go ex-dividend in just 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sanyei's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 2nd of December.

The company's next dividend payment will be JP¥40.00 per share. Last year, in total, the company distributed JP¥116 to shareholders. Looking at the last 12 months of distributions, Sanyei has a trailing yield of approximately 3.2% on its current stock price of JP¥3580.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Sanyei

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. Sanyei has a low and conservative payout ratio of just 17% of its income after tax. A useful secondary check can be to evaluate whether Sanyei generated enough free cash flow to afford its dividend. Luckily it paid out just 24% of its free cash flow last year.

It's positive to see that Sanyei'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 Sanyei 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. It's encouraging to see Sanyei has grown its earnings rapidly, up 42% a year for the past five years. Sanyei earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Sanyei has lifted its dividend by approximately 1.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sanyei is keeping back more of its profits to grow the business.

Final Takeaway

Has Sanyei got what it takes to maintain its dividend payments? It's great that Sanyei is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Sanyei, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Sanyei is facing. Case in point: We've spotted 3 warning signs for Sanyei you should be aware of.

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.