Is It Smart To Buy Aisan Industry Co., Ltd. (TSE:7283) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aisan Industry Co., Ltd. (TSE:7283) is about to trade ex-dividend in the next 2 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. 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. Meaning, you will need to purchase Aisan Industry's shares before the 28th of March to receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be JP¥37.00 per share, and in the last 12 months, the company paid a total of JP¥74.00 per share. Based on the last year's worth of payments, Aisan Industry has a trailing yield of 3.5% on the current stock price of JP¥2143.00. If you buy this business for its dividend, you should have an idea of whether Aisan Industry's dividend is reliable and sustainable. So we need to investigate whether Aisan Industry can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Aisan Industry paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Aisan Industry generated enough free cash flow to afford its dividend. Luckily it paid out just 20% of its free cash flow last year.

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.

Check out our latest analysis for Aisan Industry

Click here to see how much of its profit Aisan Industry 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Aisan Industry's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Aisan Industry has lifted its dividend by approximately 11% a year on average. 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 Aisan Industry an attractive dividend stock, or better left on the shelf? Aisan Industry has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Aisan Industry, and we would prioritise taking a closer look at it.

So while Aisan Industry looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Aisan Industry that we recommend you consider before investing in the business.

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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.