It looks like Sansei Landic Co.,Ltd (TSE:3277) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Sansei LandicLtd’s shares before the 27th of December to receive the dividend, which will be paid on the 28th of March.

The company’s upcoming dividend is JP¥25.00 a share, following on from the last 12 months, when the company distributed a total of JP¥41.00 per share to shareholders. Calculating the last year’s worth of payments shows that Sansei LandicLtd has a trailing yield of 4.3% on the current share price of JP¥948.00. If you buy this business for its dividend, you should have an idea of whether Sansei LandicLtd’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.

View our latest analysis for Sansei LandicLtd

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 Sansei LandicLtd paying out a modest 42% 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. It paid out 19% 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 Sansei LandicLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re not enthused to see that Sansei LandicLtd’s earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Sansei LandicLtd has lifted its dividend by approximately 21% a year on average.

Final Takeaway

Is Sansei LandicLtd worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Sansei LandicLtd today.

In light of that, while Sansei LandicLtd has an appealing dividend, it’s worth knowing the risks involved with this stock. For example, we’ve found 4 warning signs for Sansei LandicLtd (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.