Three Days Left To Buy Seibu Electric & Machinery Co., Ltd. (TSE:6144) Before The Ex-Dividend Date

Seibu Electric & Machinery Co., Ltd. (TSE:6144) 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 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 Seibu Electric & Machinery's shares before the 27th of September in order to receive the dividend, which the company will pay on the 9th of December.

The company's upcoming dividend is JP¥42.00 a share, following on from the last 12 months, when the company distributed a total of JP¥84.00 per share to shareholders. Based on the last year's worth of payments, Seibu Electric & Machinery stock has a trailing yield of around 4.5% on the current share price of JP¥1862.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 Seibu Electric & Machinery

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Seibu Electric & Machinery paying out a modest 34% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Seibu Electric & Machinery'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 Seibu Electric & Machinery paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Seibu Electric & Machinery's earnings per share have been shrinking at 4.7% a year over the previous five years.

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, Seibu Electric & Machinery has lifted its dividend by approximately 24% a year on average.

Final Takeaway

Is Seibu Electric & Machinery an attractive dividend stock, or better left on the shelf? Seibu Electric & Machinery has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Seibu Electric & Machinery has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Seibu Electric & Machinery has 1 warning sign we think 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.