Be Sure To Check Out Soliton Systems K.K. (TSE:3040) Before It Goes Ex-Dividend

It looks like Soliton Systems K.K. (TSE:3040) is about to go ex-dividend in the next three 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Soliton Systems K.K's shares before the 27th of June to receive the dividend, which will be paid on the 14th of August.

The company's next dividend payment will be JP¥13.00 per share, on the back of last year when the company paid a total of JP¥26.00 to shareholders. Looking at the last 12 months of distributions, Soliton Systems K.K has a trailing yield of approximately 2.1% on its current stock price of JP¥1238.00. If you buy this business for its dividend, you should have an idea of whether Soliton Systems K.K's dividend is reliable and sustainable. So we need to investigate whether Soliton Systems K.K can afford its dividend, and if the dividend could grow.

View our latest analysis for Soliton Systems K.K

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Soliton Systems K.K paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 11% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Soliton Systems K.K 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. 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 Soliton Systems K.K has grown its earnings rapidly, up 40% a year for the past five years. Soliton Systems K.K 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. Soliton Systems K.K has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Soliton Systems K.K an attractive dividend stock, or better left on the shelf? Soliton Systems K.K has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Soliton Systems K.K looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Soliton Systems K.K looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Soliton Systems K.K and you should be aware of it before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com