SCREEN Holdings Co., Ltd. (TSE:7735) 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 SCREEN Holdings Co., Ltd. (TSE:7735) is about to go ex-dividend in just two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. This means that investors who purchase SCREEN Holdings' shares on or after the 28th of March will not receive the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be JP¥119.00 per share. Last year, in total, the company distributed JP¥238 to shareholders. Based on the last year's worth of payments, SCREEN Holdings has a trailing yield of 1.3% on the current stock price of JP¥18740.00. If you buy this business for its dividend, you should have an idea of whether SCREEN Holdings's dividend is reliable and sustainable. So we need to investigate whether SCREEN Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for SCREEN Holdings

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. SCREEN Holdings paid out a comfortable 42% of its profit last year. A useful secondary check can be to evaluate whether SCREEN Holdings generated enough free cash flow to afford its dividend. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that SCREEN 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, SCREEN Holdings's earnings per share have been growing at 16% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, SCREEN Holdings has lifted its dividend by approximately 41% 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

Should investors buy SCREEN Holdings for the upcoming dividend? It's great that SCREEN Holdings 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. SCREEN Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while SCREEN Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for SCREEN Holdings that we recommend you consider before investing in the business.

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.