Why You Might Be Interested In Futaba Industrial Co., Ltd. (TSE:7241) For Its Upcoming Dividend

It looks like Futaba Industrial Co., Ltd. (TSE:7241) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day 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. 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. In other words, investors can purchase Futaba Industrial's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 27th of November.

The company's upcoming dividend is JP¥17.00 a share, following on from the last 12 months, when the company distributed a total of JP¥35.00 per share to shareholders. Looking at the last 12 months of distributions, Futaba Industrial has a trailing yield of approximately 5.0% on its current stock price of JP¥702.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Futaba Industrial has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Futaba Industrial

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. Futaba Industrial paid out a comfortable 26% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.4% of its cash flow last year.

It's positive to see that Futaba Industrial'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.

Click here to see how much of its profit Futaba Industrial paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Futaba Industrial has grown its earnings rapidly, up 28% a year for the past five years. Futaba Industrial is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Futaba Industrial has delivered 28% 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.

Final Takeaway

Is Futaba Industrial an attractive dividend stock, or better left on the shelf? We love that Futaba Industrial is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Futaba Industrial looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about Futaba Industrial's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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.