Be Sure To Check Out Kyoei Sangyo Co.,Ltd. (TSE:6973) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kyoei Sangyo Co.,Ltd. (TSE:6973) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Kyoei SangyoLtd's shares before the 27th of September in order to receive the dividend, which the company will pay on the 28th of November.

The company's next dividend payment will be JP¥55.00 per share, and in the last 12 months, the company paid a total of JP¥110 per share. Last year's total dividend payments show that Kyoei SangyoLtd has a trailing yield of 4.9% on the current share price of JP¥2235.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Kyoei SangyoLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Kyoei SangyoLtd

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. Kyoei SangyoLtd paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 11% of its free cash flow in the last year.

It's positive to see that Kyoei SangyoLtd'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 Kyoei SangyoLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Kyoei SangyoLtd has grown its earnings rapidly, up 49% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Kyoei SangyoLtd looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Kyoei SangyoLtd has lifted its dividend by approximately 11% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Kyoei SangyoLtd for the upcoming dividend? Kyoei SangyoLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Kyoei SangyoLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Kyoei SangyoLtd for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with Kyoei SangyoLtd and understanding them should be part of your investment process.

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.