We Wouldn't Be Too Quick To Buy Seino Holdings Co., Ltd. (TSE:9076) Before It Goes Ex-Dividend

It looks like Seino Holdings Co., Ltd. (TSE:9076) is about to go ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Seino Holdings' shares before the 28th of March to receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be JP¥57.00 per share. Last year, in total, the company distributed JP¥100.00 to shareholders. Last year's total dividend payments show that Seino Holdings has a trailing yield of 4.3% on the current share price of JP¥2333.50. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Seino Holdings has been able to grow its dividends, or if the dividend might be cut.

The end of cancer? These 15 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

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. Seino Holdings paid out 108% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Seino Holdings generated enough free cash flow to afford its dividend. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Seino Holdings fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

View our latest analysis for Seino Holdings

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Seino Holdings's earnings per share have been shrinking at 2.5% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Seino Holdings has delivered 25% dividend growth per year on average over the past 10 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Seino Holdings is already paying out 108% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

Final Takeaway

Should investors buy Seino Holdings for the upcoming dividend? Earnings per share have been shrinking in recent times. Worse, Seino Holdings's paying out a majority of its earnings and more than half its free cash flow. Positive cash flows are good news but it's not a good combination. It's not that we think Seino Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Seino Holdings and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 1 warning sign for Seino Holdings that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.