Interested In OYO's (TSE:9755) Upcoming JP¥47.00 Dividend? You Have Four Days Left

Readers hoping to buy OYO Corporation (TSE:9755) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase OYO's shares before the 29th of December to receive the dividend, which will be paid on the 27th of March.

The company's next dividend payment will be JP¥47.00 per share. Last year, in total, the company distributed JP¥90.00 to shareholders. Looking at the last 12 months of distributions, OYO has a trailing yield of approximately 3.3% on its current stock price of JP¥2769.00. If you buy this business for its dividend, you should have an idea of whether OYO's dividend is reliable and sustainable. As a result, readers should always check whether OYO has been able to grow its dividends, or if the dividend might be cut.

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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. OYO is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether OYO generated enough free cash flow to afford its dividend. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.

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 OYO

Click here to see how much of its profit OYO 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see OYO's earnings per share have risen 18% per annum over the last five years. OYO has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. OYO has delivered 12% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is OYO an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see OYO's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 52% and 56% respectively. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in OYO for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for OYO you should be aware of.

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.

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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.