Kanda Holdings Co.,Ltd. (TSE:9059) 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 Kanda Holdings Co.,Ltd. (TSE:9059) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kanda HoldingsLtd's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 27th of June.

The company's upcoming dividend is JP¥10.50 a share, following on from the last 12 months, when the company distributed a total of JP¥21.00 per share to shareholders. Calculating the last year's worth of payments shows that Kanda HoldingsLtd has a trailing yield of 2.5% on the current share price of JP¥828.00. 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 check whether the dividend payments are covered, and if earnings are 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. Kanda HoldingsLtd paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Kanda HoldingsLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 11% of its free 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.

View our latest analysis for Kanda HoldingsLtd

Click here to see how much of its profit Kanda HoldingsLtd 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Kanda HoldingsLtd's earnings have been skyrocketing, up 24% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Kanda HoldingsLtd looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kanda HoldingsLtd has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Kanda HoldingsLtd got what it takes to maintain its dividend payments? We love that Kanda HoldingsLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

Want to learn more about Kanda HoldingsLtd? Here's a visualisation of its historical rate of revenue and earnings growth.

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.