Satudora HoldingsLtd (TSE:3544) Could Be A Buy For Its Upcoming Dividend
Satudora Holdings Co.,Ltd. (TSE:3544) is about to trade ex-dividend in the next 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. Therefore, if you purchase Satudora HoldingsLtd's shares on or after the 14th of May, you won't be eligible to receive the dividend, when it is paid on the 10th of August.
The company's next dividend payment will be JP¥12.00 per share, on the back of last year when the company paid a total of JP¥12.00 to shareholders. Calculating the last year's worth of payments shows that Satudora HoldingsLtd has a trailing yield of 1.3% on the current share price of JP¥889.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Satudora HoldingsLtd has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Satudora HoldingsLtd paid out a comfortable 25% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 3.1% of its cash flow last year.
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.
View our latest analysis for Satudora HoldingsLtd
Click here to see how much of its profit Satudora HoldingsLtd paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Satudora HoldingsLtd has grown its earnings rapidly, up 37% a year for the past five years. Satudora HoldingsLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Satudora HoldingsLtd has delivered an average of 3.2% per year annual increase in its dividend, based on the past nine years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Satudora HoldingsLtd is keeping back more of its profits to grow the business.
Final Takeaway
Is Satudora HoldingsLtd worth buying for its dividend? Satudora HoldingsLtd has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Satudora HoldingsLtd is facing. For example - Satudora HoldingsLtd has 3 warning signs we think you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.