YAKUODO HOLDINGS Co., Ltd. (TSE:7679) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy YAKUODO HOLDINGS Co., Ltd. (TSE:7679) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, YAKUODO HOLDINGS investors that purchase the stock on or after the 27th of February will not receive the dividend, which will be paid on the 26th of May.

The company's next dividend payment will be JP¥27.00 per share, on the back of last year when the company paid a total of JP¥27.00 to shareholders. Based on the last year's worth of payments, YAKUODO HOLDINGS stock has a trailing yield of around 1.5% on the current share price of JP¥1840.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for YAKUODO HOLDINGS

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. YAKUODO HOLDINGS paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that YAKUODO HOLDINGS'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 YAKUODO HOLDINGS paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see YAKUODO HOLDINGS earnings per share are up 5.7% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, seven years ago, YAKUODO HOLDINGS has lifted its dividend by approximately 3.7% a year on average. 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

From a dividend perspective, should investors buy or avoid YAKUODO HOLDINGS? Earnings per share growth has been growing somewhat, and YAKUODO HOLDINGS is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but YAKUODO HOLDINGS is being conservative with its dividend payouts and could still perform reasonably over the long run. YAKUODO HOLDINGS looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Keen to explore more data on YAKUODO HOLDINGS's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.