Be Sure To Check Out Hagoromo Foods Corporation (TSE:2831) Before It Goes Ex-Dividend

It looks like Hagoromo Foods Corporation (TSE:2831) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Hagoromo Foods investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 8th of December.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥60.00 to shareholders. Based on the last year's worth of payments, Hagoromo Foods has a trailing yield of 1.8% on the current stock price of JP¥3390.00. If you buy this business for its dividend, you should have an idea of whether Hagoromo Foods's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hagoromo Foods paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Hagoromo Foods

Click here to see how much of its profit Hagoromo Foods 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Hagoromo Foods's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hagoromo Foods has delivered 7.2% dividend growth per year on average over the past 10 years.

The Bottom Line

Is Hagoromo Foods an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Hagoromo Foods is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. Generally we like to see both low payout ratios and strong earnings per share growth, but Hagoromo Foods is halfway there. Hagoromo Foods looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Hagoromo Foods has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Hagoromo Foods and you should be aware of this before buying any shares.

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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.