Interested In CDSLtd's (TSE:2169) Upcoming JP¥44.00 Dividend? You Have Three Days Left

CDS Co.,Ltd. (TSE:2169) stock is about to trade ex-dividend in 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. Meaning, you will need to purchase CDSLtd's shares before the 27th of December to receive the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be JP¥44.00 per share, and in the last 12 months, the company paid a total of JP¥68.00 per share. Based on the last year's worth of payments, CDSLtd stock has a trailing yield of around 3.7% on the current share price of JP¥1834.00. If you buy this business for its dividend, you should have an idea of whether CDSLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for CDSLtd

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. CDSLtd paid out 50% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that CDSLtd'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 CDSLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about CDSLtd's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CDSLtd has delivered an average of 6.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid CDSLtd? It's unfortunate that earnings per share have not grown, and we'd note that CDSLtd is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. Overall, it's hard to get excited about CDSLtd from a dividend perspective.

So while CDSLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for CDSLtd you should know about.

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.