Why You Might Be Interested In Kintetsu Group Holdings Co.,Ltd. (TSE:9041) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kintetsu Group Holdings Co.,Ltd. (TSE:9041) is about to go ex-dividend in just three days. 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. Accordingly, Kintetsu Group HoldingsLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥25.00 per share, on the back of last year when the company paid a total of JP¥50.00 to shareholders. Based on the last year's worth of payments, Kintetsu Group HoldingsLtd stock has a trailing yield of around 1.4% on the current share price of JP¥3498.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Kintetsu Group HoldingsLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Kintetsu Group HoldingsLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kintetsu Group HoldingsLtd is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.

It's positive to see that Kintetsu Group HoldingsLtd'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?

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Kintetsu Group HoldingsLtd earnings per share are up 7.0% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kintetsu Group HoldingsLtd's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Is Kintetsu Group HoldingsLtd worth buying for its dividend? Earnings per share have been growing moderately, and Kintetsu Group HoldingsLtd is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Kintetsu Group HoldingsLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Kintetsu Group HoldingsLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in Kintetsu Group HoldingsLtd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Kintetsu Group HoldingsLtd that we strongly recommend you have a look at before investing in the company.

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.