It looks like Dentsu Soken Inc. (TSE:4812) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day 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. In other words, investors can purchase Dentsu Soken's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 25th of March.
The company's next dividend payment will be JP¥54.00 per share, and in the last 12 months, the company paid a total of JP¥108 per share. Calculating the last year's worth of payments shows that Dentsu Soken has a trailing yield of 1.9% on the current share price of JP¥5770.00. If you buy this business for its dividend, you should have an idea of whether Dentsu Soken's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Dentsu Soken
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. Dentsu Soken paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Dentsu Soken generated enough free cash flow to afford its dividend. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.
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 the company's payout ratio, plus analyst estimates of its future dividends.
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. 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 Dentsu Soken has grown its earnings rapidly, up 22% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Dentsu Soken has lifted its dividend by approximately 27% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Should investors buy Dentsu Soken for the upcoming dividend? Dentsu Soken's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Dentsu Soken has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Dentsu Soken and you should be aware of it before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
About TSE:4812
Flawless balance sheet average dividend payer.
