Why You Might Be Interested In YASKAWA Electric Corporation (TSE:6506) For Its Upcoming Dividend

It looks like YASKAWA Electric Corporation (TSE:6506) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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 YASKAWA Electric's shares on or after the 27th of February will not receive the dividend, which will be paid on the 8th of May.

The company's next dividend payment will be JP¥34.00 per share, and in the last 12 months, the company paid a total of JP¥68.00 per share. Last year's total dividend payments show that YASKAWA Electric has a trailing yield of 1.5% on the current share price of JP¥4411.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether YASKAWA Electric has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for YASKAWA Electric

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. YASKAWA Electric is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that YASKAWA Electric'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see YASKAWA Electric earnings per share are up 8.7% per annum 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.

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, YASKAWA Electric has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is YASKAWA Electric worth buying for its dividend? Earnings per share have been growing at a steady rate, and YASKAWA Electric paid out less than half its profits and more than half its free cash flow as dividends over the last year. To summarise, YASKAWA Electric looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks YASKAWA Electric is facing. Case in point: We've spotted 1 warning sign for YASKAWA Electric 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.