Is It Smart To Buy Oenon Holdings, Inc. (TSE:2533) Before It Goes Ex-Dividend?

Readers hoping to buy Oenon Holdings, Inc. (TSE:2533) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Oenon Holdings' shares before the 27th of December in order to receive the dividend, which the company will pay on the 25th of March.

The company's next dividend payment will be JP¥10.00 per share, and in the last 12 months, the company paid a total of JP¥8.00 per share. Looking at the last 12 months of distributions, Oenon Holdings has a trailing yield of approximately 2.0% on its current stock price of JP¥396.00. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Oenon Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oenon Holdings has a low and conservative payout ratio of just 16% of its income after tax. A useful secondary check can be to evaluate whether Oenon Holdings generated enough free cash flow to afford its dividend. Luckily it paid out just 7.3% of its free cash flow last year.

It's positive to see that Oenon 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 Oenon Holdings paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Oenon Holdings has grown its earnings rapidly, up 46% a year for the past five years. Oenon Holdings looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Oenon Holdings has delivered an average of 1.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Oenon Holdings is keeping back more of its profits to grow the business.

The Bottom Line

Has Oenon Holdings got what it takes to maintain its dividend payments? It's great that Oenon Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Oenon Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Oenon Holdings is facing. Our analysis shows 1 warning sign for Oenon Holdings and you should be aware of this before buying any shares.

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.