Be Sure To Check Out Japan Cash Machine Co., Ltd. (TSE:6418) Before It Goes Ex-Dividend

Readers hoping to buy Japan Cash Machine Co., Ltd. (TSE:6418) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Thus, you can purchase Japan Cash Machine's shares before the 28th of March in order to receive the dividend, which the company will pay on the 4th of June.

The company's upcoming dividend is JP¥36.00 a share, following on from the last 12 months, when the company distributed a total of JP¥40.00 per share to shareholders. Last year's total dividend payments show that Japan Cash Machine has a trailing yield of 3.5% on the current share price of JP¥1137.00. If you buy this business for its dividend, you should have an idea of whether Japan Cash Machine's dividend is reliable and sustainable. As a result, readers should always check whether Japan Cash Machine has been able to grow its dividends, or if the dividend might be cut.

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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. Japan Cash Machine has a low and conservative payout ratio of just 16% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

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.

See our latest analysis for Japan Cash Machine

Click here to see how much of its profit Japan Cash Machine paid out over the last 12 months.

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. It's encouraging to see Japan Cash Machine has grown its earnings rapidly, up 37% a year for the past five years. Japan Cash Machine 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.

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, Japan Cash Machine has lifted its dividend by approximately 8.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Japan Cash Machine got what it takes to maintain its dividend payments? It's great that Japan Cash Machine 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. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Japan Cash Machine that we recommend you consider before investing in the business.

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.