Japan Foods Holding Ltd. (Catalist:5OI) stock is about to trade ex-dividend in 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Japan Foods Holding investors that purchase the stock on or after the 26th of July will not receive the dividend, which will be paid on the 14th of August.
The company's next dividend payment will be S$0.01 per share, and in the last 12 months, the company paid a total of S$0.02 per share. Calculating the last year's worth of payments shows that Japan Foods Holding has a trailing yield of 4.5% on the current share price of SGD0.44. 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.
Check out our latest analysis for Japan Foods Holding
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. Its dividend payout ratio is 85% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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 20% of its free cash flow as dividends last year, which is conservatively low.
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.
Click here to see how much of its profit Japan Foods Holding paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Japan Foods Holding's earnings per share have dropped 6.6% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.