Read This Before Considering Hagihara Industries Inc. (TSE:7856) For Its Upcoming JP¥30.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hagihara Industries Inc. (TSE:7856) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be two business days 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. 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. This means that investors who purchase Hagihara Industries' shares on or after the 28th of April will not receive the dividend, which will be paid on the 2nd of July.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥65.00 to shareholders. Calculating the last year's worth of payments shows that Hagihara Industries has a trailing yield of 4.4% on the current share price of JP¥1466.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's 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 Hagihara Industries paying out a modest 43% of its earnings. A useful secondary check can be to evaluate whether Hagihara Industries generated enough free cash flow to afford its dividend. Over the last year it paid out 64% of its free cash flow as dividends, within the usual 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.

See our latest analysis for Hagihara Industries

Click here to see how much of its profit Hagihara Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Hagihara Industries's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hagihara Industries has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid Hagihara Industries? Earnings per share are down very slightly in recent times, and Hagihara Industries paid out less half its profit and more than half its cash flow as dividends, which is not the worst combination but could be better. In summary, while it has some positive characteristics, we're not inclined to race out and buy Hagihara Industries today.

With that being said, if dividends aren't your biggest concern with Hagihara Industries, you should know about the other risks facing this business. For example, we've found 1 warning sign for Hagihara Industries that we recommend you consider before investing in the business.

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.