Read This Before Considering Advantage Risk Management Co., Ltd. (TSE:8769) For Its Upcoming JP¥12.00 Dividend

Readers hoping to buy Advantage Risk Management Co., Ltd. (TSE:8769) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day 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. 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. This means that investors who purchase Advantage Risk Management's shares on or after the 28th of March will not receive the dividend, which will be paid on the 1st of July.

The company's upcoming dividend is JP¥12.00 a share, following on from the last 12 months, when the company distributed a total of JP¥10.00 per share to shareholders. Based on the last year's worth of payments, Advantage Risk Management has a trailing yield of 2.4% on the current stock price of JP¥423.00. If you buy this business for its dividend, you should have an idea of whether Advantage Risk Management's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Advantage Risk Management

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Advantage Risk Management paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Advantage Risk Management generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Advantage Risk Management'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 Advantage Risk Management paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Advantage Risk Management's earnings per share have been shrinking at 2.9% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Advantage Risk Management has lifted its dividend by approximately 15% a year on average.

Final Takeaway

Has Advantage Risk Management got what it takes to maintain its dividend payments? Advantage Risk Management has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. We've identified 3 warning signs with Advantage Risk Management (at least 1 which makes us a bit uncomfortable), and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.