There's A Lot To Like About Yamato Kogyo's (TSE:5444) Upcoming JP¥200.00 Dividend
It looks like Yamato Kogyo Co., Ltd. (TSE:5444) is about to go ex-dividend in the next 3 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. 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. Meaning, you will need to purchase Yamato Kogyo's shares before the 29th of September to receive the dividend, which will be paid on the 3rd of December.
The company's upcoming dividend is JP¥200.00 a share, following on from the last 12 months, when the company distributed a total of JP¥400 per share to shareholders. Based on the last year's worth of payments, Yamato Kogyo has a trailing yield of 3.2% on the current stock price of JP¥12485.00. If you buy this business for its dividend, you should have an idea of whether Yamato Kogyo's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. That's why it's good to see Yamato Kogyo paying out a modest 35% of its earnings. A useful secondary check can be to evaluate whether Yamato Kogyo generated enough free cash flow to afford its dividend. Over the last year it paid out 55% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Yamato Kogyo'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.
View our latest analysis for Yamato Kogyo
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Yamato Kogyo's earnings have been skyrocketing, up 73% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Yamato Kogyo has delivered 26% 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
Should investors buy Yamato Kogyo for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Yamato Kogyo paid out less than half its earnings and a bit over half its free cash flow. Yamato Kogyo looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Yamato Kogyo for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Yamato Kogyo you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.