Here's What We Like About SuzukiLtd's (TSE:6785) Upcoming Dividend

Suzuki Co.,Ltd. (TSE:6785) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase SuzukiLtd's shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be JP¥46.00 per share, and in the last 12 months, the company paid a total of JP¥46.00 per share. Last year's total dividend payments show that SuzukiLtd has a trailing yield of 3.0% on the current share price of JP¥1517.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for SuzukiLtd

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. SuzukiLtd paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether SuzukiLtd generated enough free cash flow to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that SuzukiLtd'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 SuzukiLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at SuzukiLtd, with earnings per share up 7.7% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, SuzukiLtd has lifted its dividend by approximately 15% 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.

Final Takeaway

Should investors buy SuzukiLtd for the upcoming dividend? Earnings per share growth has been growing somewhat, and SuzukiLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but SuzukiLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about SuzukiLtd, and we would prioritise taking a closer look at it.

Keen to explore more data on SuzukiLtd's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.

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