There's A Lot To Like About Daiken Medical's (TSE:7775) Upcoming JP¥13.00 Dividend

It looks like Daiken Medical Co., Ltd. (TSE:7775) is about to go ex-dividend in the next four 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 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 Daiken Medical's shares before the 28th of March in order to receive the dividend, which the company will pay on the 3rd of June.

The company's next dividend payment will be JP¥13.00 per share, and in the last 12 months, the company paid a total of JP¥18.00 per share. Last year's total dividend payments show that Daiken Medical has a trailing yield of 3.6% on the current share price of JP¥502.00. 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 Daiken Medical has been able to grow its dividends, or if the dividend might be cut.

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 said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 44% of its free cash flow in the past year.

See our latest analysis for Daiken Medical

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. With that in mind, we're encouraged by the steady growth at Daiken Medical, with earnings per share up 4.9% on average over the last five years. Recent earnings growth has been limited. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Daiken Medical's dividend payments per share have declined at 2.2% per year on average over the past seven years, which is uninspiring. Daiken Medical is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

From a dividend perspective, should investors buy or avoid Daiken Medical? Earnings per share growth has been growing somewhat, and Daiken Medical 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. It might be nice to see earnings growing faster, but Daiken Medical is being conservative with its dividend payouts and could still perform reasonably over the long run. Daiken Medical 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 Daiken Medical is facing. For example - Daiken Medical has 2 warning signs we think you should be aware of.

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.