Is It Smart To Buy HIRAYAMA HOLDINGS Co.,Ltd. (TSE:7781) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HIRAYAMA HOLDINGS Co.,Ltd. (TSE:7781) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day 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. In other words, investors can purchase HIRAYAMA HOLDINGSLtd's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 4th of March.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥50.00 to shareholders. Looking at the last 12 months of distributions, HIRAYAMA HOLDINGSLtd has a trailing yield of approximately 4.7% on its current stock price of JP¥1068.00. 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! So we need to investigate whether HIRAYAMA HOLDINGSLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for HIRAYAMA HOLDINGSLtd

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 HIRAYAMA HOLDINGSLtd paying out a modest 39% 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. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.

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 how much of its profit HIRAYAMA HOLDINGSLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, HIRAYAMA HOLDINGSLtd's earnings per share have been growing at 15% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. HIRAYAMA HOLDINGSLtd has delivered an average of 20% per year annual increase in its dividend, based on the past nine years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has HIRAYAMA HOLDINGSLtd got what it takes to maintain its dividend payments? HIRAYAMA HOLDINGSLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about HIRAYAMA HOLDINGSLtd, and we would prioritise taking a closer look at it.

In light of that, while HIRAYAMA HOLDINGSLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for HIRAYAMA HOLDINGSLtd and you should be aware of them 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.