es Networks Co., Ltd. (TSE:5867) Passed Our Checks, And It's About To Pay A JP¥58.00 Dividend
es Networks Co., Ltd. (TSE:5867) 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase es Networks' shares on or after the 29th of December, you won't be eligible to receive the dividend, when it is paid on the 10th of March.
The company's next dividend payment will be JP¥58.00 per share, on the back of last year when the company paid a total of JP¥45.00 to shareholders. Based on the last year's worth of payments, es Networks has a trailing yield of 3.5% on the current stock price of JP¥1275.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether es Networks 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. es Networks paid out a comfortable 47% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.
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.
See our latest analysis for es Networks
Click here to see how much of its profit es Networks 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. For this reason, we're glad to see es Networks's earnings per share have risen 17% per annum over the last five years. es Networks has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. es Networks has delivered 4.8% dividend growth per year on average over the past two years. 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 es Networks? Earnings per share have grown at a nice rate in recent times and over the last year, es Networks paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about es Networks, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for es Networks that we recommend you consider before investing in the business.
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.