Shin-Etsu Chemical Co., Ltd. (TSE:4063) Passed Our Checks, And It's About To Pay A JP¥78.00 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shin-Etsu Chemical Co., Ltd. (TSE:4063) 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 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. Meaning, you will need to purchase Shin-Etsu Chemical's shares before the 29th of September to receive the dividend, which will be paid on the 18th of November.
The company's next dividend payment will be JP¥78.00 per share. Last year, in total, the company distributed JP¥106 to shareholders. Calculating the last year's worth of payments shows that Shin-Etsu Chemical has a trailing yield of 2.0% on the current share price of JP¥5903.00. 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 Shin-Etsu Chemical 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. That's why it's good to see Shin-Etsu Chemical paying out a modest 41% of its earnings. 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. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Check out our latest analysis for Shin-Etsu Chemical
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Shin-Etsu Chemical's earnings per share have risen 13% per annum over the last five years. Shin-Etsu Chemical has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shin-Etsu Chemical has delivered 18% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Should investors buy Shin-Etsu Chemical for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Shin-Etsu Chemical paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Shin-Etsu Chemical has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Shin-Etsu Chemical and you should be aware of this before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.