HIROSHIMA GAS Co.,Ltd. (TSE:9535) Will Pay A JP¥6.00 Dividend In Three Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HIROSHIMA GAS Co.,Ltd. (TSE:9535) is about to trade ex-dividend in the next three 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, HIROSHIMA GASLtd investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 1st of December.
The company's upcoming dividend is JP¥6.00 a share, following on from the last 12 months, when the company distributed a total of JP¥12.00 per share to shareholders. Last year's total dividend payments show that HIROSHIMA GASLtd has a trailing yield of 2.7% on the current share price of JP¥441.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether HIROSHIMA GASLtd can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately HIROSHIMA GASLtd's payout ratio is modest, at just 43% of profit. 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. The good news is it paid out just 21% of its free cash flow in the last year.
It's positive to see that HIROSHIMA GASLtd'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.
Check out our latest analysis for HIROSHIMA GASLtd
Click here to see how much of its profit HIROSHIMA GASLtd paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see HIROSHIMA GASLtd's earnings per share have dropped 18% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, HIROSHIMA GASLtd has lifted its dividend by approximately 7.2% a year on average.
Final Takeaway
Is HIROSHIMA GASLtd worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, HIROSHIMA GASLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So while HIROSHIMA GASLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with HIROSHIMA GASLtd and understanding them should be part of your investment process.
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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.