Sankyo Frontier Co.,Ltd. (TSE:9639) is about to trade ex-dividend in the next 4 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 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. Therefore, if you purchase Sankyo FrontierLtd's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of December.
The company's next dividend payment will be JP¥50.00 per share, and in the last 12 months, the company paid a total of JP¥90.00 per share. Last year's total dividend payments show that Sankyo FrontierLtd has a trailing yield of 4.2% on the current share price of JP¥2383.00. 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! So we need to investigate whether Sankyo FrontierLtd can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Sankyo FrontierLtd paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Sankyo FrontierLtd generated enough free cash flow to afford its dividend. It paid out 100% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
While Sankyo FrontierLtd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Sankyo FrontierLtd's ability to maintain its dividend.
View our latest analysis for Sankyo FrontierLtd
Click here to see how much of its profit Sankyo FrontierLtd paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Sankyo FrontierLtd, with earnings per share up 2.6% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Sankyo FrontierLtd has lifted its dividend by approximately 11% 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.
To Sum It Up
From a dividend perspective, should investors buy or avoid Sankyo FrontierLtd? Sankyo FrontierLtd delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 100% of its cash flow over the last year, which is a mediocre outcome. In summary, while it has some positive characteristics, we're not inclined to race out and buy Sankyo FrontierLtd today.
If you're not too concerned about Sankyo FrontierLtd's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 2 warning signs for Sankyo FrontierLtd (1 can't be ignored!) that deserve your attention before investing in the 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.