Read This Before Considering Fujishoji Co.,Ltd. (TSE:6257) For Its Upcoming JP¥25.00 Dividend

Fujishoji Co.,Ltd. (TSE:6257) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, FujishojiLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 6th of December.

The company's next dividend payment will be JP¥25.00 per share. Last year, in total, the company distributed JP¥55.00 to shareholders. Last year's total dividend payments show that FujishojiLtd has a trailing yield of 4.2% on the current share price of JP¥1313.00. 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! As a result, readers should always check whether FujishojiLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for FujishojiLtd

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. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. It paid out more than half (68%) of its free cash flow in the past year, which is within an average range for most companies.

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 FujishojiLtd 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, FujishojiLtd's earnings per share have been growing at 14% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last six years, FujishojiLtd has lifted its dividend by approximately 1.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because FujishojiLtd is keeping back more of its profits to grow the business.

The Bottom Line

Is FujishojiLtd worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that FujishojiLtd is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while FujishojiLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for FujishojiLtd and you should be aware of these 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.