There's A Lot To Like About Rigaku Holdings' (TSE:268A) Upcoming JP¥9.40 Dividend

Rigaku Holdings Corporation (TSE:268A) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Rigaku Holdings' shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 1st of January.

The company's next dividend payment will be JP¥9.40 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 investigate whether Rigaku Holdings can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Rigaku Holdings has a low and conservative payout ratio of just 5.1% of its income after tax. A useful secondary check can be to evaluate whether Rigaku Holdings generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 9.5% of its 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.

Check out our latest analysis for Rigaku Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. 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 we're optimistic about Rigaku Holdings's earnings, which have ripped higher, up 71% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far. Rigaku Holdings looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

This is Rigaku Holdings'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

From a dividend perspective, should investors buy or avoid Rigaku Holdings? We love that Rigaku Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Rigaku Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Rigaku Holdings you should know about.

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.