Be Sure To Check Out Sanyo Electric Railway Co.,Ltd. (TSE:9052) Before It Goes Ex-Dividend

Sanyo Electric Railway Co.,Ltd. (TSE:9052) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day 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. Meaning, you will need to purchase Sanyo Electric RailwayLtd's shares before the 28th of March to receive the dividend, which will be paid on the 1st of July.

The company's next dividend payment will be JP¥15.00 per share, on the back of last year when the company paid a total of JP¥30.00 to shareholders. Based on the last year's worth of payments, Sanyo Electric RailwayLtd has a trailing yield of 1.4% on the current stock price of JP¥2163.00. If you buy this business for its dividend, you should have an idea of whether Sanyo Electric RailwayLtd's dividend is reliable and sustainable. So we need to investigate whether Sanyo Electric RailwayLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for Sanyo Electric RailwayLtd

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. Fortunately Sanyo Electric RailwayLtd's payout ratio is modest, at just 27% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 35% of its free cash flow in the past 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.

Click here to see how much of its profit Sanyo Electric RailwayLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Sanyo Electric RailwayLtd earnings per share are up 9.5% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Sanyo Electric RailwayLtd has lifted its dividend by approximately 4.1% 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

Should investors buy Sanyo Electric RailwayLtd for the upcoming dividend? Earnings per share growth has been growing somewhat, and Sanyo Electric RailwayLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Sanyo Electric RailwayLtd is halfway there. Sanyo Electric RailwayLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Sanyo Electric RailwayLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Sanyo Electric RailwayLtd that you should be aware of before investing in their 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.