Japan Power Fastening Co.,Ltd. (TSE:5950) Is About To Go Ex-Dividend, And It Pays A 1.1% Yield

Japan Power Fastening Co.,Ltd. (TSE:5950) stock is about to trade ex-dividend in 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Japan Power FasteningLtd investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 23rd of August.

The company's next dividend payment will be JP¥20.00 per share. Last year, in total, the company distributed JP¥2.50 to shareholders. Last year's total dividend payments show that Japan Power FasteningLtd has a trailing yield of 1.1% on the current share price of JP¥238.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Japan Power FasteningLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Japan Power FasteningLtd'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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. 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. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit Japan Power FasteningLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Japan Power FasteningLtd reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Japan Power FasteningLtd has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see.

Get our latest analysis on Japan Power FasteningLtd's balance sheet health here.

To Sum It Up

Is Japan Power FasteningLtd worth buying for its dividend? It's hard to get used to Japan Power FasteningLtd paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Japan Power FasteningLtd's dividend merits.

While it's tempting to invest in Japan Power FasteningLtd for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Japan Power FasteningLtd (1 is a bit unpleasant) you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com