Is It Worth Considering G-7 Holdings Inc. (TSE:7508) For Its 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 G-7 Holdings Inc. (TSE:7508) is about to go ex-dividend in just 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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 G-7 Holdings' shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.
The company's upcoming dividend is JP¥35.00 a share, following on from the last 12 months, when the company distributed a total of JP¥70.00 per share to shareholders. Based on the last year's worth of payments, G-7 Holdings has a trailing yield of 4.8% on the current stock price of JP¥1448.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether G-7 Holdings has been able to grow its dividends, or if the dividend might be cut.
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. Fortunately G-7 Holdings's payout ratio is modest, at just 38% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that G-7 Holdings'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 G-7 Holdings
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about G-7 Holdings's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, G-7 Holdings has lifted its dividend by approximately 23% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid G-7 Holdings? Earnings per share are down very slightly in recent times, and G-7 Holdings paid out less half its profit and more than half its cash flow as dividends, which is not the worst combination but could be better. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
With that being said, if dividends aren't your biggest concern with G-7 Holdings, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for G-7 Holdings that you should be aware of before investing in their shares.
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.