Income Investors Should Know That Shimizu Corporation (TSE:1803) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shimizu Corporation (TSE:1803) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Shimizu's shares on or after the 29th of September will not receive the dividend, which will be paid on the 3rd of December.

The company's next dividend payment will be JP¥22.00 per share. Last year, in total, the company distributed JP¥44.00 to shareholders. Based on the last year's worth of payments, Shimizu has a trailing yield of 2.1% on the current stock price of JP¥2114.00. If you buy this business for its dividend, you should have an idea of whether Shimizu's dividend is reliable and sustainable. As a result, readers should always check whether Shimizu has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Shimizu's payout ratio is modest, at just 35% 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. Luckily it paid out just 13% of its free cash flow last year.

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.

View our latest analysis for Shimizu

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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's why it's not ideal to see Shimizu's earnings per share have been shrinking at 3.0% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Shimizu has lifted its dividend by approximately 20% a year on average.

To Sum It Up

Is Shimizu worth buying for its dividend? Earnings per share are down meaningfully, 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 needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Shimizu has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Shimizu and you should be aware of these before buying any 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.