Should You Buy Japaniace Co.,Ltd. (TSE:9558) For Its Upcoming Dividend?

Japaniace Co.,Ltd. (TSE:9558) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase JapaniaceLtd's shares before the 28th of November in order to receive the dividend, which the company will pay on the 26th of February.

The company's next dividend payment will be JP¥48.00 per share. 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 JapaniaceLtd

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. That's why it's good to see JapaniaceLtd paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether JapaniaceLtd generated enough free cash flow to afford its dividend. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that JapaniaceLtd'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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see JapaniaceLtd's earnings have been skyrocketing, up 21% per annum for the past five years. JapaniaceLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

This is JapaniaceLtd's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

Final Takeaway

Is JapaniaceLtd worth buying for its dividend? JapaniaceLtd 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. JapaniaceLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while JapaniaceLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for JapaniaceLtd you should be aware of.

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.