Only Three Days Left To Cash In On GMO Pepabo's (TSE:3633) Dividend

GMO Pepabo, Inc. (TSE:3633) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase GMO Pepabo's shares before the 27th of December to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥53.00 per share. Last year, in total, the company distributed JP¥53.00 to shareholders. Based on the last year's worth of payments, GMO Pepabo stock has a trailing yield of around 3.4% on the current share price of JP¥1550.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for GMO Pepabo

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. GMO Pepabo reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. 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. The good news is it paid out just 22% of its free cash flow in the last year.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at GMO Pepabo, with earnings per share up 3.4% on average over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. GMO Pepabo has delivered 4.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has GMO Pepabo got what it takes to maintain its dividend payments? GMO Pepabo has been steadily growing its earnings per share, and it is paying out just 22% of its cash flow but an uncomfortably high -42% of its income. In summary, while it has some positive characteristics, we're not inclined to race out and buy GMO Pepabo today.

With that being said, if dividends aren't your biggest concern with GMO Pepabo, you should know about the other risks facing this business. For example, we've found 3 warning signs for GMO Pepabo (1 is significant!) that deserve your attention before investing in the 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.

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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.