Should You Buy Daiichi Kigenso Kagaku Kogyo Co., Ltd. (TSE:4082) For Its Upcoming Dividend?
Readers hoping to buy Daiichi Kigenso Kagaku Kogyo Co., Ltd. (TSE:4082) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Daiichi Kigenso Kagaku Kogyo's shares before the 29th of September in order to receive the dividend, which the company will pay on the 1st of December.
The company's upcoming dividend is JP¥15.00 a share, following on from the last 12 months, when the company distributed a total of JP¥28.00 per share to shareholders. Last year's total dividend payments show that Daiichi Kigenso Kagaku Kogyo has a trailing yield of 1.2% on the current share price of JP¥2322.00. 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.
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. Daiichi Kigenso Kagaku Kogyo has a low and conservative payout ratio of just 20% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.
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.
See our latest analysis for Daiichi Kigenso Kagaku Kogyo
Click here to see how much of its profit Daiichi Kigenso Kagaku Kogyo 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. That's why it's comforting to see Daiichi Kigenso Kagaku Kogyo's earnings have been skyrocketing, up 23% per annum for the past five years. Daiichi Kigenso Kagaku Kogyo looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Daiichi Kigenso Kagaku Kogyo has increased its dividend at approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Daiichi Kigenso Kagaku Kogyo for the upcoming dividend? It's great that Daiichi Kigenso Kagaku Kogyo is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Daiichi Kigenso Kagaku Kogyo, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Daiichi Kigenso Kagaku Kogyo is facing. For example - Daiichi Kigenso Kagaku Kogyo has 2 warning signs we think you should be aware of.
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.