Is It Smart To Buy Xebio Holdings Co., Ltd. (TSE:8281) Before It Goes Ex-Dividend?

Xebio Holdings Co., Ltd. (TSE:8281) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days 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. Meaning, you will need to purchase Xebio Holdings' shares before the 28th of March to receive the dividend, which will be paid on the 12th of June.

The company's next dividend payment will be JP¥15.00 per share, on the back of last year when the company paid a total of JP¥30.00 to shareholders. Calculating the last year's worth of payments shows that Xebio Holdings has a trailing yield of 2.4% on the current share price of JP¥1258.00. If you buy this business for its dividend, you should have an idea of whether Xebio Holdings's dividend is reliable and sustainable. So we need to investigate whether Xebio Holdings can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Xebio Holdings has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether Xebio Holdings generated enough free cash flow to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Xebio Holdings'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.

See our latest analysis for Xebio Holdings

Click here to see how much of its profit Xebio Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Xebio Holdings's earnings per share have been growing at 13% a year for the past five years. Xebio Holdings has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Xebio Holdings's dividend payments per share have declined at 1.5% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

From a dividend perspective, should investors buy or avoid Xebio Holdings? Earnings per share have grown at a nice rate in recent times and over the last year, Xebio Holdings paid out less than half its earnings and a bit over half its free cash flow. Xebio Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Xebio Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Xebio Holdings that we recommend you consider before investing in the business.

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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.