SAKAI HoldingsLTD (TSE:9446) Could Be A Buy For Its Upcoming Dividend

SAKAI Holdings CO.,LTD (TSE:9446) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, SAKAI HoldingsLTD investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 30th of December.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥26.00 to shareholders. Looking at the last 12 months of distributions, SAKAI HoldingsLTD has a trailing yield of approximately 4.8% on its current stock price of JP¥542.00. If you buy this business for its dividend, you should have an idea of whether SAKAI HoldingsLTD's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. SAKAI HoldingsLTD is paying out just 10% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that SAKAI HoldingsLTD'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 SAKAI HoldingsLTD

Click here to see how much of its profit SAKAI HoldingsLTD 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see SAKAI HoldingsLTD has grown its earnings rapidly, up 48% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, SAKAI HoldingsLTD looks like a promising growth company.

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, SAKAI HoldingsLTD has lifted its dividend by approximately 10% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is SAKAI HoldingsLTD an attractive dividend stock, or better left on the shelf? It's great that SAKAI HoldingsLTD 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. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 4 warning signs for SAKAI HoldingsLTD that we strongly recommend you have a look at before investing in the company.

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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.