Yokowo Co., Ltd. (TSE:6800) Pays A JP¥32.00 Dividend In Just Four Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Yokowo Co., Ltd. (TSE:6800) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Yokowo's shares before the 29th of September in order to receive the dividend, which the company will pay on the 10th of December.
The company's next dividend payment will be JP¥32.00 per share. Last year, in total, the company distributed JP¥64.00 to shareholders. Based on the last year's worth of payments, Yokowo has a trailing yield of 1.4% on the current stock price of JP¥4465.00. If you buy this business for its dividend, you should have an idea of whether Yokowo's dividend is reliable and sustainable. So we need to investigate whether Yokowo can afford its dividend, and if the dividend could grow.
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. Yokowo is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Yokowo generated enough free cash flow to afford its dividend. Over the past year it paid out 147% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Yokowo paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Yokowo's ability to maintain its dividend.
Check out our latest analysis for Yokowo
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Yokowo, with earnings per share up 4.1% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Yokowo has increased its dividend at approximately 16% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has Yokowo got what it takes to maintain its dividend payments? Yokowo has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. All things considered, we are not particularly enthused about Yokowo from a dividend perspective.
If you're not too concerned about Yokowo's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Yokowo has 1 warning sign we think you should be aware of.
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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.