Read This Before Considering SoftBank Corp. (TSE:9434) For Its Upcoming JP¥4.30 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SoftBank Corp. (TSE:9434) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase SoftBank's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 8th of December.

The company's next dividend payment will be JP¥4.30 per share, on the back of last year when the company paid a total of JP¥8.60 to shareholders. Calculating the last year's worth of payments shows that SoftBank has a trailing yield of 3.8% on the current share price of JP¥226.90. If you buy this business for its dividend, you should have an idea of whether SoftBank's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. 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. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

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.

Check out our latest analysis for SoftBank

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that SoftBank's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. A payout ratio of 81% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past seven years, SoftBank has increased its dividend at approximately 13% a year on average.

To Sum It Up

Should investors buy SoftBank for the upcoming dividend? Earnings per share have barely grown, and although SoftBank paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. To summarise, SoftBank looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in SoftBank as a potential investment, you should definitely consider some of the risks involved with SoftBank. In terms of investment risks, we've identified 1 warning sign with SoftBank and understanding them should be part of your investment process.

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.