Senkon Logistics Co., Ltd. (TSE:9051) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Senkon Logistics Co., Ltd. (TSE:9051) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Senkon Logistics' shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The company's upcoming dividend is JP¥7.50 a share, following on from the last 12 months, when the company distributed a total of JP¥15.00 per share to shareholders. Based on the last year's worth of payments, Senkon Logistics has a trailing yield of 1.2% on the current stock price of JP¥1230.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Senkon Logistics has been able to grow its dividends, or if the dividend might be cut.

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. Senkon Logistics is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.9% of its cash flow last year.

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.

See our latest analysis for Senkon Logistics

Click here to see how much of its profit Senkon Logistics paid out over the last 12 months.

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. For this reason, we're glad to see Senkon Logistics's earnings per share have risen 19% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

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, Senkon Logistics has lifted its dividend by approximately 1.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Senkon Logistics is keeping back more of its profits to grow the business.

To Sum It Up

Has Senkon Logistics got what it takes to maintain its dividend payments? Senkon Logistics has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with Senkon Logistics (including 1 which is a bit concerning).

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.