Restar Corporation (TSE:3156) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Restar Corporation (TSE:3156) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves 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 Restar's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 5th of December.

The company's upcoming dividend is JP¥60.00 a share, following on from the last 12 months, when the company distributed a total of JP¥120 per share to shareholders. Last year's total dividend payments show that Restar has a trailing yield of 4.3% on the current share price of JP¥2760.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Restar has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Restar

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. Fortunately Restar's payout ratio is modest, at just 37% of profit. 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. Fortunately, it paid out only 33% of its free cash flow in the past year.

It's positive to see that Restar'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 how much of its profit Restar paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Restar's earnings per share have risen 17% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Restar has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Restar for the upcoming dividend? It's great that Restar is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Restar looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Restar for the dividends alone, you should always be mindful of the risks involved. Be aware that Restar is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.