Shin-Etsu Polymer Co.,Ltd. (TSE:7970) is about to trade ex-dividend in the next three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Shin-Etsu PolymerLtd investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 26th of November.
The company's upcoming dividend is JP¥33.00 a share, following on from the last 12 months, when the company distributed a total of JP¥64.00 per share to shareholders. Looking at the last 12 months of distributions, Shin-Etsu PolymerLtd has a trailing yield of approximately 2.8% on its current stock price of JP¥2330.00. 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.
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. Shin-Etsu PolymerLtd paid out 54% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Shin-Etsu PolymerLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Check out our latest analysis for Shin-Etsu PolymerLtd
Click here to see how much of its profit Shin-Etsu PolymerLtd 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Shin-Etsu PolymerLtd's earnings per share have been growing at 15% a year for the past five years. Shin-Etsu PolymerLtd is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
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, Shin-Etsu PolymerLtd has lifted its dividend by approximately 22% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Has Shin-Etsu PolymerLtd got what it takes to maintain its dividend payments? Shin-Etsu PolymerLtd's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
Curious about whether Shin-Etsu PolymerLtd has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.