Read This Before Considering Itoham Yonekyu Holdings Inc. (TSE:2296) For Its Upcoming JP¥70.00 Dividend

It looks like Itoham Yonekyu Holdings Inc. (TSE:2296) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. Meaning, you will need to purchase Itoham Yonekyu Holdings' shares before the 27th of September to receive the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is JP¥70.00 a share, following on from the last 12 months, when the company distributed a total of JP¥145 per share to shareholders. Based on the last year's worth of payments, Itoham Yonekyu Holdings has a trailing yield of 3.7% on the current stock price of JP¥3870.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Itoham Yonekyu Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Itoham Yonekyu Holdings

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 Itoham Yonekyu Holdings paying out a modest 47% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 142% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Itoham Yonekyu Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Itoham Yonekyu Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Itoham Yonekyu Holdings earnings per share are up 8.3% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Itoham Yonekyu Holdings has delivered 8.6% dividend growth per year on average over the past eight years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Itoham Yonekyu Holdings worth buying for its dividend? Itoham Yonekyu Holdings delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 142% of its cash flow over the last year, which is a mediocre outcome. In summary, while it has some positive characteristics, we're not inclined to race out and buy Itoham Yonekyu Holdings today.

If you're not too concerned about Itoham Yonekyu Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 1 warning sign for Itoham Yonekyu Holdings that you should be aware of before investing in their shares.

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.