Sun A.Kaken Company,Limited (TSE:4234) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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 Sun A.Kaken CompanyLimited's shares before the 29th of September to receive the dividend, which will be paid on the 7th of December.
The company's upcoming dividend is JP¥9.00 a share, following on from the last 12 months, when the company distributed a total of JP¥18.00 per share to shareholders. Last year's total dividend payments show that Sun A.Kaken CompanyLimited has a trailing yield of 1.8% on the current share price of JP¥1019.00. If you buy this business for its dividend, you should have an idea of whether Sun A.Kaken CompanyLimited's dividend is reliable and sustainable. As a result, readers should always check whether Sun A.Kaken CompanyLimited has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sun A.Kaken CompanyLimited is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 17% of its free cash flow in the last year.
It's positive to see that Sun A.Kaken CompanyLimited'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.
View our latest analysis for Sun A.Kaken CompanyLimited
Click here to see how much of its profit Sun A.Kaken CompanyLimited paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Sun A.Kaken CompanyLimited's earnings per share have risen 10% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Sun A.Kaken CompanyLimited has increased its dividend at approximately 2.5% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
From a dividend perspective, should investors buy or avoid Sun A.Kaken CompanyLimited? We love that Sun A.Kaken CompanyLimited is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Sun A.Kaken CompanyLimited has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Sun A.Kaken CompanyLimited has 3 warning signs (and 1 which can't be ignored) we think you should know about.
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.