Here's What We Like About Inaba Denki SangyoLtd's (TSE:9934) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Inaba Denki Sangyo Co.,Ltd. (TSE:9934) is about to trade ex-dividend in the next 3 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Inaba Denki SangyoLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥60.00 per share. Last year, in total, the company distributed JP¥130 to shareholders. Based on the last year's worth of payments, Inaba Denki SangyoLtd stock has a trailing yield of around 3.4% on the current share price of JP¥3790.00. If you buy this business for its dividend, you should have an idea of whether Inaba Denki SangyoLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Inaba Denki SangyoLtd

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 Inaba Denki SangyoLtd paying out a modest 41% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Inaba Denki SangyoLtd'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 Inaba Denki SangyoLtd paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Inaba Denki SangyoLtd's earnings per share have been growing at 11% a year for the past five years. Inaba Denki SangyoLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Inaba Denki SangyoLtd has delivered an average of 8.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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

Has Inaba Denki SangyoLtd got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Inaba Denki SangyoLtd paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Inaba Denki SangyoLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in Inaba Denki SangyoLtd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Inaba Denki SangyoLtd and you should be aware of this before buying any shares.

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.