Sumitomo Seika Chemicals Company, Limited. (TSE:4008) Passed Our Checks, And It's About To Pay A JP¥35.00 Dividend
Sumitomo Seika Chemicals Company, Limited. (TSE:4008) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Sumitomo Seika Chemicals Company's shares before the 29th of September in order to receive the dividend, which the company will pay on the 7th of December.
The company's next dividend payment will be JP¥35.00 per share. Last year, in total, the company distributed JP¥48.00 to shareholders. Based on the last year's worth of payments, Sumitomo Seika Chemicals Company has a trailing yield of 4.6% on the current stock price of JP¥1521.00. If you buy this business for its dividend, you should have an idea of whether Sumitomo Seika Chemicals Company's dividend is reliable and sustainable. As a result, readers should always check whether Sumitomo Seika Chemicals Company 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. Fortunately Sumitomo Seika Chemicals Company's payout ratio is modest, at just 29% of profit. 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. It paid out more than half (62%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Sumitomo Seika Chemicals Company'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.
View our latest analysis for Sumitomo Seika Chemicals Company
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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Sumitomo Seika Chemicals Company earnings per share are up 8.3% per annum over the last five years. Decent historical earnings per share growth suggests Sumitomo Seika Chemicals Company has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Sumitomo Seika Chemicals Company has lifted its dividend by approximately 17% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Sumitomo Seika Chemicals Company? Earnings per share growth has been modest, and it's interesting that Sumitomo Seika Chemicals Company is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Sumitomo Seika Chemicals Company's dividend merits.
In light of that, while Sumitomo Seika Chemicals Company has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Sumitomo Seika Chemicals Company (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
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.