Readers who want to buy Belc CO., LTD. (TSE:9974) for its dividend will need to act soon as the stock will soon trade ex-dividend. The ex-dividend date is one business day before the record date, the date on which shareholders must be on the company’s books to be eligible to receive a dividend payment. The ex-dividend date is important because trading takes at least two business days each time a share is bought or sold. This means that investors who purchase Belc shares on or after August 29 will not receive the dividend, which is paid on November 1.
The company’s upcoming dividend is JP¥58.00 per share. Over the last 12 months, the company has paid out a total of JP¥116 per share to shareholders. Based on last year’s payments, Belc stock is yielding around 1.9% on the current share price of JP¥6130.00. We like it when companies pay a dividend, but it’s also important to make sure that laying golden eggs doesn’t kill our golden goose! So we need to check if dividend payments are covered and if earnings are growing.
Check out our latest analysis for Belc
If a company pays out more in dividends than it earns, the dividend can become unsustainable – far from an ideal situation. Belc only pays out 22% of its profit after tax, which is comfortably low and leaves plenty of room to maneuver in the event of untoward events. A useful second check can be to evaluate whether Belc generated enough free cash flow to afford the dividend. Dividends consumed 71% of the company’s free cash flow last year, which is within the normal range for most dividend-paying companies.
It’s encouraging to see that the dividend is covered by both profits and cash flow. This generally suggests that the dividend is sustainable as long as earnings don’t fall precipitously.
Click here to see the company’s payout ratio as well as analyst estimates of its future dividends.
Have earnings and dividends increased?
Shares in companies that generate sustainable earnings growth often have the best dividend prospects because when profits are growing, it is easier to increase the dividend. If the business hits a crisis and the dividend is cut, the value of the company could fall sharply. With that in mind, we are encouraged by the steady growth at Belc, with earnings per share growing by an average of 9.4% over the past five years. Although earnings have grown at a credible pace, the company distributes the majority of its profits to shareholders. Therefore, it is unlikely that the company will be able to reinvest heavily in its business, which could herald slower growth in the future.
Most investors judge a company’s dividend prospects by its historical dividend growth rate. Belc has averaged 11% dividend growth per year over the past 10 years. It’s encouraging to see the company increasing its dividends while earnings are growing, suggesting at least some interest from the company in rewarding its shareholders.
Last Takeaway
Is Belc an attractive dividend stock or is it better left on the shelf? Earnings per share growth has been modest and it’s interesting that Belc pays out less than half of its profit and more than half of its cash flow to shareholders in the form of dividends. All in all, we’re not particularly excited about Belc from a dividend perspective.
Wondering what the future holds for Belc? See the forecasts from the three analysts we track, with this visualization of historical and future estimated earnings and cash flows
In general, we would not recommend simply buying the first dividend stock you see. Here is a curated list of interesting stocks with high dividend numbers.
Valuation is complex, but we are here to simplify it.
Find out if Belc could be undervalued or overvalued with our detailed analysis, including Fair value estimates, potential risks, dividends, insider trading and the company’s financial condition.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
