Here's What We Like About KanamotoLtd's (TSE:9678) Upcoming 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 Kanamoto Co.,Ltd. (TSE:9678) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. This means that investors who purchase KanamotoLtd's shares on or after the 29th of October will not receive the dividend, which will be paid on the 23rd of January.
The company's upcoming dividend is JP¥55.00 a share, following on from the last 12 months, when the company distributed a total of JP¥110 per share to shareholders. Based on the last year's worth of payments, KanamotoLtd stock has a trailing yield of around 2.0% on the current share price of JP¥5580.00. If you buy this business for its dividend, you should have an idea of whether KanamotoLtd's dividend is reliable and sustainable. So we need to investigate whether KanamotoLtd can afford its dividend, and if the dividend could grow.
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. KanamotoLtd paid out a comfortable 26% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 8.1% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that KanamotoLtd'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 KanamotoLtd
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see KanamotoLtd's earnings per share have risen 13% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. KanamotoLtd has delivered 9.3% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Should investors buy KanamotoLtd for the upcoming dividend? KanamotoLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
So while KanamotoLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for KanamotoLtd you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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