Is It Smart To Buy Japan Logistic Systems Corp. (TSE:9060) Before It Goes Ex-Dividend?
Japan Logistic Systems Corp. (TSE:9060) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Japan Logistic Systems' shares before the 29th of September in order to receive the dividend, which the company will pay on the 9th of December.
The company's next dividend payment will be JP¥40.00 per share, and in the last 12 months, the company paid a total of JP¥80.00 per share. Based on the last year's worth of payments, Japan Logistic Systems has a trailing yield of 1.9% on the current stock price of JP¥4160.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Japan Logistic Systems has a low and conservative payout ratio of just 20% of its income after tax. 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 4.2% of its free cash flow in the last year.
It's positive to see that Japan Logistic Systems'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 Japan Logistic Systems
Click here to see how much of its profit Japan Logistic Systems 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Japan Logistic Systems, with earnings per share up 3.5% on average over the last five years. Japan Logistic Systems is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Japan Logistic Systems dividends are largely the same as they were 10 years ago.
To Sum It Up
Should investors buy Japan Logistic Systems for the upcoming dividend? Earnings per share growth has been growing somewhat, and Japan Logistic Systems is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Japan Logistic Systems is halfway there. It's a promising combination that should mark this company worthy of closer attention.
So while Japan Logistic Systems looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for Japan Logistic Systems and you should be aware of these 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.