Okinawa Cellular Telephone Company (TSE:9436) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Okinawa Cellular Telephone Company (TSE:9436) 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 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. Meaning, you will need to purchase Okinawa Cellular Telephone's shares before the 28th of March to receive the dividend, which will be paid on the 16th of June.

The company's next dividend payment will be JP¥60.00 per share, on the back of last year when the company paid a total of JP¥120 to shareholders. Based on the last year's worth of payments, Okinawa Cellular Telephone stock has a trailing yield of around 2.8% on the current share price of JP¥4335.00. If you buy this business for its dividend, you should have an idea of whether Okinawa Cellular Telephone's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. That's why it's good to see Okinawa Cellular Telephone paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Okinawa Cellular Telephone generated enough free cash flow to afford its dividend. It paid out more than half (75%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Okinawa Cellular Telephone'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.

View our latest analysis for Okinawa Cellular Telephone

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 encouraged by the steady growth at Okinawa Cellular Telephone, with earnings per share up 8.4% on average over the last five years. Decent historical earnings per share growth suggests Okinawa Cellular Telephone has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Okinawa Cellular Telephone has lifted its dividend by approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Okinawa Cellular Telephone worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that Okinawa Cellular Telephone is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Wondering what the future holds for Okinawa Cellular Telephone? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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.