Three Days Left To Buy Canon Inc. (TSE:7751) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Canon Inc. (TSE:7751) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Canon's shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be JP¥75.00 per share, on the back of last year when the company paid a total of JP¥150 to shareholders. Calculating the last year's worth of payments shows that Canon has a trailing yield of 3.5% on the current share price of JP¥4345.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Canon

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Canon paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Canon'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 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 Canon earnings per share are up 3.4% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Canon has lifted its dividend by approximately 1.4% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Canon? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. To summarise, Canon looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Canon, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Canon you should be aware of.

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