Read This Before Considering Creo Co.,Ltd. (TSE:9698) For Its Upcoming JP¥51.00 Dividend

It looks like Creo Co.,Ltd. (TSE:9698) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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. 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. In other words, investors can purchase CreoLtd's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 23rd of June.

The company's next dividend payment will be JP¥51.00 per share, and in the last 12 months, the company paid a total of JP¥51.00 per share. Based on the last year's worth of payments, CreoLtd has a trailing yield of 4.4% on the current stock price of JP¥1168.00. If you buy this business for its dividend, you should have an idea of whether CreoLtd's dividend is reliable and sustainable. So we need to investigate whether CreoLtd can afford its dividend, and if the dividend could grow.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. CreoLtd is paying out an acceptable 52% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 25% 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.

View our latest analysis for CreoLtd

Click here to see how much of its profit CreoLtd 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that CreoLtd's earnings are effectively flat 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, CreoLtd has lifted its dividend by approximately 26% a year on average.

To Sum It Up

Is CreoLtd worth buying for its dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. To summarise, CreoLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into CreoLtd, it's worth knowing the risks this business faces. Be aware that CreoLtd is showing 2 warning signs in our investment analysis, and 1 of those is concerning...

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.