Be Sure To Check Out Yakult Honsha Co.,Ltd. (TSE:2267) Before It Goes Ex-Dividend

Yakult Honsha Co.,Ltd. (TSE:2267) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is two business days 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. In other words, investors can purchase Yakult HonshaLtd's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be JP¥32.00 per share, and in the last 12 months, the company paid a total of JP¥64.00 per share. Calculating the last year's worth of payments shows that Yakult HonshaLtd has a trailing yield of 2.1% on the current share price of JP¥3091.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

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 Yakult HonshaLtd paying out a modest 36% of its earnings. A useful secondary check can be to evaluate whether Yakult HonshaLtd generated enough free cash flow to afford its dividend. Fortunately, it paid out only 50% of its free cash flow in the past year.

It's positive to see that Yakult HonshaLtd'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.

Check out our latest analysis for Yakult HonshaLtd

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Yakult HonshaLtd earnings per share are up 9.2% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Yakult HonshaLtd has lifted its dividend by approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Yakult HonshaLtd? Earnings per share have been growing moderately, and Yakult HonshaLtd is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Yakult HonshaLtd is halfway there. Yakult HonshaLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Yakult HonshaLtd? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.