Should Income Investors Look At Amiyaki Tei Co., Ltd. (TSE:2753) Before Its Ex-Dividend?

It looks like Amiyaki Tei Co., Ltd. (TSE:2753) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase Amiyaki Tei's shares on or after the 27th of September will not receive the dividend, which will be paid on the 18th of December.

The company's upcoming dividend is JP¥51.00 a share, following on from the last 12 months, when the company distributed a total of JP¥102 per share to shareholders. Looking at the last 12 months of distributions, Amiyaki Tei has a trailing yield of approximately 1.7% on its current stock price of JP¥5920.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Amiyaki Tei can afford its dividend, and if the dividend could grow.

See our latest analysis for Amiyaki Tei

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Amiyaki Tei paying out a modest 40% of its earnings. 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. The good news is it paid out just 21% of its free cash flow in the last year.

It's positive to see that Amiyaki Tei'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 Amiyaki Tei 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Amiyaki Tei'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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Amiyaki Tei has increased its dividend at approximately 9.8% a year on average.

Final Takeaway

Is Amiyaki Tei worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

Curious about whether Amiyaki Tei has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.