There's A Lot To Like About Univance's (TSE:7254) Upcoming JP¥6.00 Dividend

Univance Corporation (TSE:7254) is about to trade ex-dividend in the next three 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. 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. In other words, investors can purchase Univance's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be JP¥6.00 per share, and in the last 12 months, the company paid a total of JP¥14.00 per share. Calculating the last year's worth of payments shows that Univance has a trailing yield of 3.4% on the current share price of JP¥410.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Univance has been able to grow its dividends, or if the dividend might be cut.

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. Univance paid out just 6.7% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 3.2% of its free cash flow last year.

It's positive to see that Univance'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.

See our latest analysis for Univance

Click here to see how much of its profit Univance 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Univance's earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Univance has increased its dividend at approximately 4.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Univance is keeping back more of its profits to grow the business.

To Sum It Up

Should investors buy Univance for the upcoming dividend? It's great that Univance is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Univance, and we would prioritise taking a closer look at it.

While it's tempting to invest in Univance for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 4 warning signs with Univance and understanding them should be part of your investment process.

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