The Yokohama Rubber Company, Limited (TSE:5101) Goes Ex-Dividend Soon

The Yokohama Rubber Company, Limited (TSE:5101) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Yokohama Rubber Company investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 1st of September.

The company's next dividend payment will be JP¥48.00 per share. Last year, in total, the company distributed JP¥102 to shareholders. Based on the last year's worth of payments, Yokohama Rubber Company has a trailing yield of 3.0% on the current stock price of JP¥3441.00. If you buy this business for its dividend, you should have an idea of whether Yokohama Rubber Company's dividend is reliable and sustainable. As a result, readers should always check whether Yokohama Rubber Company has been able to grow its dividends, or if the dividend might be cut.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. Yokohama Rubber Company has a low and conservative payout ratio of just 25% of its income after tax. A useful secondary check can be to evaluate whether Yokohama Rubber Company generated enough free cash flow to afford its dividend. It paid out an unsustainably high 265% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Yokohama Rubber Company 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 Yokohama Rubber Company's ability to maintain its dividend.

View our latest analysis for Yokohama Rubber Company

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Yokohama Rubber Company earnings per share are up 9.1% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Yokohama Rubber Company has lifted its dividend by approximately 6.2% 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

From a dividend perspective, should investors buy or avoid Yokohama Rubber Company? Yokohama Rubber Company 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 Yokohama Rubber Company from a dividend perspective.

If you're not too concerned about Yokohama Rubber Company's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. We've identified 2 warning signs with Yokohama Rubber Company (at least 1 which doesn't sit too well with us), and understanding these 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.