Here's What We Like About JEOL's (TSE:6951) Upcoming Dividend

It looks like JEOL Ltd. (TSE:6951) is about to go ex-dividend in the next 3 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase JEOL's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 11th of December.

The company's next dividend payment will be JP¥44.00 per share. Last year, in total, the company distributed JP¥88.00 to shareholders. Last year's total dividend payments show that JEOL has a trailing yield of 1.6% on the current share price of JP¥5553.00. 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 JEOL can afford its dividend, and if the dividend could grow.

See our latest analysis for JEOL

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. JEOL is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Fortunately, it paid out only 30% of its free cash flow in the past 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.

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. It's encouraging to see JEOL has grown its earnings rapidly, up 31% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

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, JEOL has lifted its dividend by approximately 24% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is JEOL an attractive dividend stock, or better left on the shelf? We love that JEOL 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. JEOL looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in JEOL for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for JEOL 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.

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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.