Espec Corp. (TSE:6859) Stock Goes Ex-Dividend In Just Three Days

It looks like Espec Corp. (TSE:6859) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Espec's shares on or after the 28th of March will not receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be JP¥60.00 per share, and in the last 12 months, the company paid a total of JP¥80.00 per share. Looking at the last 12 months of distributions, Espec has a trailing yield of approximately 3.2% on its current stock price of JP¥2500.00. 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 Espec has been able to grow its dividends, or if the dividend might be cut.

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 Espec's payout ratio is modest, at just 32% of profit. A useful secondary check can be to evaluate whether Espec generated enough free cash flow to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range 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.

See our latest analysis for Espec

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Espec earnings per share are up 6.9% per annum over the last five years. Decent historical earnings per share growth suggests Espec has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Espec 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Espec? Earnings per share growth has been modest, and it's interesting that Espec is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Espec from a dividend perspective.

In light of that, while Espec has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Espec that we recommend you consider before investing in the business.

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.