It Might Not Be A Great Idea To Buy Osaka Yuka Industry Ltd. (TSE:4124) For Its Next 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 Osaka Yuka Industry Ltd. (TSE:4124) is about to go ex-dividend in just two days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Osaka Yuka Industry's shares before the 27th of September in order to receive the dividend, which the company will pay on the 23rd of December.

The company's next dividend payment will be JP¥35.00 per share, and in the last 12 months, the company paid a total of JP¥35.00 per share. Looking at the last 12 months of distributions, Osaka Yuka Industry has a trailing yield of approximately 2.3% on its current stock price of JP¥1511.00. If you buy this business for its dividend, you should have an idea of whether Osaka Yuka Industry's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Osaka Yuka Industry

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. Osaka Yuka Industry's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see how much of its profit Osaka Yuka Industry paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Osaka Yuka Industry was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Osaka Yuka Industry has delivered an average of 8.8% per year annual increase in its dividend, based on the past four years of dividend payments.

Remember, you can always get a snapshot of Osaka Yuka Industry's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Osaka Yuka Industry worth buying for its dividend? It's hard to get used to Osaka Yuka Industry paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Osaka Yuka Industry has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Osaka Yuka Industry. For example, we've found 3 warning signs for Osaka Yuka Industry (1 is potentially serious!) that deserve your attention before investing in the shares.

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.