Only Three Days Left To Cash In On Daido Kogyo's (TSE:6373) Dividend

Readers hoping to buy Daido Kogyo Co., Ltd. (TSE:6373) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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. Meaning, you will need to purchase Daido Kogyo's shares before the 28th of March to receive the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be JP¥25.00 per share, and in the last 12 months, the company paid a total of JP¥25.00 per share. Looking at the last 12 months of distributions, Daido Kogyo has a trailing yield of approximately 2.9% on its current stock price of JP¥868.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Daido Kogyo paying out a modest 32% of its earnings. A useful secondary check can be to evaluate whether Daido Kogyo generated enough free cash flow to afford its dividend. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Daido Kogyo'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.

Check out our latest analysis for Daido Kogyo

Click here to see how much of its profit Daido Kogyo 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Daido Kogyo's 9.9% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Daido Kogyo's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Final Takeaway

From a dividend perspective, should investors buy or avoid Daido Kogyo? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Daido Kogyo from a dividend perspective.

If you want to look further into Daido Kogyo, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with Daido Kogyo (including 1 which doesn't sit too well with us).

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.