Punch Industry Co., Ltd. (TSE:6165) Passed Our Checks, And It's About To Pay A JP¥10.50 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 Punch Industry Co., Ltd. (TSE:6165) 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Punch Industry's shares before the 29th of September to receive the dividend, which will be paid on the 14th of December.
The company's next dividend payment will be JP¥10.50 per share, and in the last 12 months, the company paid a total of JP¥20.00 per share. Calculating the last year's worth of payments shows that Punch Industry has a trailing yield of 3.7% on the current share price of JP¥550.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Punch Industry paying out a modest 50% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.
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.
View our latest analysis for Punch Industry
Click here to see how much of its profit Punch Industry 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. 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 Punch Industry's earnings per share have risen 12% per annum over the last five years. Punch Industry is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
We'd also point out that Punch Industry issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Punch Industry has lifted its dividend by approximately 4.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Punch Industry is keeping back more of its profits to grow the business.
The Bottom Line
From a dividend perspective, should investors buy or avoid Punch Industry? Earnings per share have grown at a nice rate in recent times and over the last year, Punch Industry paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Punch Industry, and we would prioritise taking a closer look at it.
In light of that, while Punch Industry has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Punch Industry has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
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.