It looks like Enshu Truck Co.,Ltd. (TSE:9057) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Enshu TruckLtd investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 8th of December.
The company's next dividend payment will be JP¥48.00 per share, and in the last 12 months, the company paid a total of JP¥96.00 per share. Calculating the last year's worth of payments shows that Enshu TruckLtd has a trailing yield of 2.9% on the current share price of JP¥3275.00. If you buy this business for its dividend, you should have an idea of whether Enshu TruckLtd's dividend is reliable and sustainable. So we need to investigate whether Enshu TruckLtd can afford its dividend, and if the dividend could grow.
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. Enshu TruckLtd paid out a comfortable 32% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 112% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While Enshu TruckLtd'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 Enshu TruckLtd's ability to maintain its dividend.
Check out our latest analysis for Enshu TruckLtd
Click here to see how much of its profit Enshu TruckLtd paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Enshu TruckLtd's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. 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. Since the start of our data, 10 years ago, Enshu TruckLtd has lifted its dividend by approximately 20% a year on average.
The Bottom Line
Should investors buy Enshu TruckLtd for the upcoming dividend? Earnings per share have been effectively flat over this time, and Enshu TruckLtd's paying out less than half its profits and 112% of its cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. In summary, it's hard to get excited about Enshu TruckLtd from a dividend perspective.
If you're not too concerned about Enshu TruckLtd's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 2 warning signs for Enshu TruckLtd (1 can't be ignored!) that you ought to be aware of before buying the shares.
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.