Yuasa Trading Co., Ltd. (TSE:8074) Goes Ex-Dividend Soon

Yuasa Trading Co., Ltd. (TSE:8074) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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 Yuasa Trading's shares before the 28th of March to receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be JP¥118.00 per share, on the back of last year when the company paid a total of JP¥168 to shareholders. Based on the last year's worth of payments, Yuasa Trading has a trailing yield of 3.6% on the current stock price of JP¥4730.00. 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.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Yuasa Trading paying out a modest 37% of its earnings. A useful secondary check can be to evaluate whether Yuasa Trading generated enough free cash flow to afford its dividend. The company paid out 100% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Yuasa Trading's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Yuasa Trading to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Yuasa Trading

Click here to see how much of its profit Yuasa Trading 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. With that in mind, we're encouraged by the steady growth at Yuasa Trading, with earnings per share up 2.3% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Yuasa Trading has increased its dividend at approximately 9.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Yuasa Trading an attractive dividend stock, or better left on the shelf? Yuasa Trading has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Yuasa Trading, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 1 warning sign for Yuasa Trading and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.