Is It Smart To Buy Casio Computer Co.,Ltd. (TSE:6952) Before It Goes Ex-Dividend?
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 Casio Computer Co.,Ltd. (TSE:6952) is about to go ex-dividend in just four 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Casio ComputerLtd's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 2nd of December.
The company's upcoming dividend is JP¥22.50 a share, following on from the last 12 months, when the company distributed a total of JP¥45.00 per share to shareholders. Based on the last year's worth of payments, Casio ComputerLtd stock has a trailing yield of around 2.1% on the current share price of JP¥2183.00. If you buy this business for its dividend, you should have an idea of whether Casio ComputerLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Casio ComputerLtd paying out a modest 43% 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 more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Casio ComputerLtd'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 Casio ComputerLtd
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Casio ComputerLtd's earnings per share have been growing at 17% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Casio ComputerLtd has delivered 1.2% dividend growth per year on average over the past 10 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.
Final Takeaway
Is Casio ComputerLtd worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Casio ComputerLtd paid out less than half its earnings and a bit over half its free cash flow. Casio ComputerLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Casio ComputerLtd for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Casio ComputerLtd that we recommend you consider before investing in the business.
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.