The Kaneshita Construction Co.,Ltd. (TSE:1897) Pays A JP¥50.00 Dividend In Just Four Days

The Kaneshita Construction Co.,Ltd. (TSE:1897) stock is about to trade ex-dividend in four 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. 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 Kaneshita ConstructionLtd's shares before the 29th of December in order to receive the dividend, which the company will pay on the 27th of March.

The company's next dividend payment will be JP¥50.00 per share, on the back of last year when the company paid a total of JP¥50.00 to shareholders. Last year's total dividend payments show that Kaneshita ConstructionLtd has a trailing yield of 1.7% on the current share price of JP¥2920.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kaneshita ConstructionLtd paid out 57% of its earnings to investors last year, a normal payout level for most businesses. 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 15% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Kaneshita ConstructionLtd'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 Kaneshita ConstructionLtd

Click here to see how much of its profit Kaneshita ConstructionLtd paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Kaneshita ConstructionLtd earnings per share are up 5.3% per annum over the last five years. Decent historical earnings per share growth suggests Kaneshita ConstructionLtd 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kaneshita ConstructionLtd's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kaneshita ConstructionLtd? Earnings per share growth has been modest and Kaneshita ConstructionLtd paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about Kaneshita ConstructionLtd from a dividend perspective.

While it's tempting to invest in Kaneshita ConstructionLtd for the dividends alone, you should always be mindful of the risks involved. Be aware that Kaneshita ConstructionLtd is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.