Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that EXEO Group, Inc. (TSE:1951) is about to go ex-dividend in just 3 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, EXEO Group investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 30th of November.
The company's next dividend payment will be JP¥40.00 per share, and in the last 12 months, the company paid a total of JP¥80.00 per share. Based on the last year's worth of payments, EXEO Group stock has a trailing yield of around 3.1% on the current share price of JP¥2605.00. If you buy this business for its dividend, you should have an idea of whether EXEO Group's dividend is reliable and sustainable. So we need to investigate whether EXEO Group 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. That's why it's good to see EXEO Group paying out a modest 41% of its earnings. 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. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that EXEO Group'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 EXEO Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. With that in mind, we're encouraged by the steady growth at EXEO Group, with earnings per share up 9.2% on average over the last five years. Decent historical earnings per share growth suggests EXEO Group has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. EXEO Group has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is EXEO Group worth buying for its dividend? Earnings per share have been growing at a steady rate, and EXEO Group paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy EXEO Group today.
Curious what other investors think of EXEO Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.