There's A Lot To Like About Daifuku's (TSE:6383) Upcoming JP¥20.00 Dividend

Readers hoping to buy Daifuku Co., Ltd. (TSE:6383) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Daifuku's shares on or after the 27th of September will not receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be JP¥20.00 per share, and in the last 12 months, the company paid a total of JP¥53.00 per share. Last year's total dividend payments show that Daifuku has a trailing yield of 1.9% on the current share price of JP¥2720.50. If you buy this business for its dividend, you should have an idea of whether Daifuku'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.

View our latest analysis for Daifuku

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. Fortunately Daifuku's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Daifuku generated enough free cash flow to afford its dividend. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Daifuku, with earnings per share up 5.6% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Daifuku has delivered 23% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Daifuku an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Daifuku is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Daifuku today.

While it's tempting to invest in Daifuku for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Daifuku that we recommend you consider before investing in the business.

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.