Bridgestone Corporation (TSE:5108) Pays A JP¥105.00 Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bridgestone Corporation (TSE:5108) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase Bridgestone's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 27th of March.

The company's next dividend payment will be JP¥105.00 per share. Last year, in total, the company distributed JP¥210 to shareholders. Looking at the last 12 months of distributions, Bridgestone has a trailing yield of approximately 4.0% on its current stock price of JP¥5247.00. If you buy this business for its dividend, you should have an idea of whether Bridgestone's dividend is reliable and sustainable. So we need to investigate whether Bridgestone can afford its dividend, and if the dividend could grow.

See our latest analysis for Bridgestone

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 Bridgestone's payout ratio is modest, at just 45% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (66%) 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.

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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Bridgestone earnings per share are up 3.4% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bridgestone has lifted its dividend by approximately 10% 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 Bridgestone got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Bridgestone paid out less than half its profits and more than half its free cash flow as dividends over the last year. All things considered, we are not particularly enthused about Bridgestone from a dividend perspective.

While it's tempting to invest in Bridgestone for the dividends alone, you should always be mindful of the risks involved. For example - Bridgestone has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.