Should You Buy Kyushu Electric Power Company, Incorporated (TSE:9508) For Its Upcoming Dividend?

Readers hoping to buy Kyushu Electric Power Company, Incorporated (TSE:9508) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Kyushu Electric Power Company's shares before the 27th of September in order to receive the dividend, which the company will pay on the 1st of January.

The company's next dividend payment will be JP¥25.00 per share. Last year, in total, the company distributed JP¥50.00 to shareholders. Calculating the last year's worth of payments shows that Kyushu Electric Power Company has a trailing yield of 3.1% on the current share price of JP¥1591.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Kyushu Electric Power Company

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kyushu Electric Power Company is paying out just 9.0% 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. The good news is it paid out just 0.02% of its free cash flow in the 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.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Kyushu Electric Power Company has grown its earnings rapidly, up 37% a year for the past five years. Kyushu Electric Power Company looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

We'd also point out that Kyushu Electric Power Company issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

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, eight years ago, Kyushu Electric Power Company has lifted its dividend by approximately 33% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Kyushu Electric Power Company an attractive dividend stock, or better left on the shelf? It's great that Kyushu Electric Power Company is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. 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. For instance, we've identified 3 warning signs for Kyushu Electric Power Company (2 are concerning) you should be aware of.

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.