Four Days Left To Buy Cosmo Bio Company,Limited (TSE:3386) Before The Ex-Dividend Date

Cosmo Bio Company,Limited (TSE:3386) is about to trade ex-dividend in the next four 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. In other words, investors can purchase Cosmo Bio CompanyLimited's shares before the 29th of December in order to be eligible for the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be JP¥25.00 per share. Last year, in total, the company distributed JP¥61.00 to shareholders. Based on the last year's worth of payments, Cosmo Bio CompanyLimited has a trailing yield of 4.6% on the current stock price of JP¥1337.00. 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 Cosmo Bio CompanyLimited can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cosmo Bio CompanyLimited distributed an unsustainably high 143% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Cosmo Bio CompanyLimited generated enough free cash flow to afford its dividend. Fortunately, it paid out only 46% of its free cash flow in the past year.

It's good to see that while Cosmo Bio CompanyLimited's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Check out our latest analysis for Cosmo Bio CompanyLimited

Click here to see how much of its profit Cosmo Bio CompanyLimited paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Cosmo Bio CompanyLimited's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cosmo Bio CompanyLimited has delivered 16% dividend growth per year on average over the past 10 years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Cosmo Bio CompanyLimited? Earnings per share have been flat and, while Cosmo Bio CompanyLimited paid out just 46% of its cashflow, it paid out an uncomfortably high percentage of its profit. In summary, it's hard to get excited about Cosmo Bio CompanyLimited from a dividend perspective.

If you want to look further into Cosmo Bio CompanyLimited, it's worth knowing the risks this business faces. To that end, you should learn about the 5 warning signs we've spotted with Cosmo Bio CompanyLimited (including 2 which don't sit too well with us).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.