Is It Worth Considering Ricoh Company, Ltd. (TSE:7752) For Its Upcoming Dividend?

Readers hoping to buy Ricoh Company, Ltd. (TSE:7752) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. Thus, you can purchase Ricoh Company's shares before the 27th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's upcoming dividend is JP¥19.00 a share, following on from the last 12 months, when the company distributed a total of JP¥38.00 per share to shareholders. Based on the last year's worth of payments, Ricoh Company has a trailing yield of 2.5% on the current stock price of JP¥1535.50. 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 Ricoh Company has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Ricoh Company

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. Ricoh Company paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Ricoh Company generated enough free cash flow to afford its dividend. Fortunately, it paid out only 38% of its free cash flow in the past year.

It's positive to see that Ricoh Company'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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Ricoh Company's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. 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, Ricoh Company has lifted its dividend by approximately 1.4% a year on average.

The Bottom Line

Is Ricoh Company an attractive dividend stock, or better left on the shelf? Earnings per share have been flat and Ricoh Company's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. In summary, while it has some positive characteristics, we're not inclined to race out and buy Ricoh Company today.

While it's tempting to invest in Ricoh Company for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Ricoh Company 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.