Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Okinawa Cellular Telephone Company (TSE:9436) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Okinawa Cellular Telephone's shares before the 29th of September in order to receive the dividend, which the company will pay on the 7th of December.
The company's next dividend payment will be JP¥35.00 per share, and in the last 12 months, the company paid a total of JP¥70.00 per share. Last year's total dividend payments show that Okinawa Cellular Telephone has a trailing yield of 1.6% on the current share price of JP¥4405.00. If you buy this business for its dividend, you should have an idea of whether Okinawa Cellular Telephone's dividend is reliable and sustainable. So we need to investigate whether Okinawa Cellular Telephone can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Okinawa Cellular Telephone paid out a comfortable 44% of its profit last year. A useful secondary check can be to evaluate whether Okinawa Cellular Telephone 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 positive to see that Okinawa Cellular Telephone's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Okinawa Cellular Telephone
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. 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 Okinawa Cellular Telephone, with earnings per share up 9.4% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Okinawa Cellular Telephone has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Okinawa Cellular Telephone for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Okinawa Cellular Telephone is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Okinawa Cellular Telephone's dividend merits.
Wondering what the future holds for Okinawa Cellular Telephone? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.