There's A Lot To Like About Canon Marketing Japan's (TSE:8060) Upcoming JP¥60.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Canon Marketing Japan Inc. (TSE:8060) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Canon Marketing Japan investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 26th of August.

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¥150 per share. Based on the last year's worth of payments, Canon Marketing Japan has a trailing yield of 2.8% on the current stock price of JP¥5427.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Canon Marketing Japan paid out a comfortable 43% of its profit last year. A useful secondary check can be to evaluate whether Canon Marketing Japan generated enough free cash flow to afford its dividend. Fortunately, it paid out only 45% of its free cash flow in the past year.

It's positive to see that Canon Marketing Japan'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.

Check out our latest analysis for Canon Marketing Japan

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Canon Marketing Japan's earnings per share have been growing at 16% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Canon Marketing Japan has delivered 17% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Canon Marketing Japan an attractive dividend stock, or better left on the shelf? It's great that Canon Marketing Japan is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Canon Marketing Japan, and we would prioritise taking a closer look at it.

While it's tempting to invest in Canon Marketing Japan for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Canon Marketing Japan and you should be aware of it before buying any shares.

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.