Should Income Investors Look At Oriental Shiraishi Corporation (TSE:1786) Before Its Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Oriental Shiraishi Corporation (TSE:1786) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Oriental Shiraishi's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 12th of December.

The company's upcoming dividend is JP¥7.00 a share, following on from the last 12 months, when the company distributed a total of JP¥14.50 per share to shareholders. Looking at the last 12 months of distributions, Oriental Shiraishi has a trailing yield of approximately 3.7% on its current stock price of JP¥392.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Oriental Shiraishi

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. Oriental Shiraishi paid out a comfortable 36% of its profit last year. A useful secondary check can be to evaluate whether Oriental Shiraishi generated enough free cash flow to afford its dividend. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Oriental Shiraishi'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Oriental Shiraishi's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 81% a year over the past five years.

Oriental Shiraishi also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Oriental Shiraishi has delivered 15% dividend growth per year on average over the past two years.

To Sum It Up

Is Oriental Shiraishi an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Oriental Shiraishi paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Oriental Shiraishi, it's worth knowing the risks this business faces. Be aware that Oriental Shiraishi is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...

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.