Should You Buy Daiwa Securities Group Inc. (TSE:8601) For Its Upcoming Dividend?

Daiwa Securities Group Inc. (TSE:8601) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Daiwa Securities Group's shares before the 27th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's upcoming dividend is JP¥19.00 a share, following on from the last 12 months, when the company distributed a total of JP¥50.00 per share to shareholders. Calculating the last year's worth of payments shows that Daiwa Securities Group has a trailing yield of 4.8% on the current share price of JP¥1041.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Daiwa Securities Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Daiwa Securities Group

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. Daiwa Securities Group is paying out an acceptable 51% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Daiwa Securities Group's earnings per share have risen 17% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Daiwa Securities Group has lifted its dividend by approximately 5.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Daiwa Securities Group is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Daiwa Securities Group? Daiwa Securities Group has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Daiwa Securities Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Daiwa Securities Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Daiwa Securities Group you should know about.

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.