Dividend Investors: Don't Be Too Quick To Buy HABA Laboratories,Inc. (TSE:4925) For Its Upcoming Dividend

HABA Laboratories,Inc. (TSE:4925) stock is about to trade ex-dividend in 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, HABA LaboratoriesInc investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 10th of June.

The company's upcoming dividend is JP¥40.00 a share, following on from the last 12 months, when the company distributed a total of JP¥40.00 per share to shareholders. Calculating the last year's worth of payments shows that HABA LaboratoriesInc has a trailing yield of 2.1% on the current share price of JP¥1864.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether HABA LaboratoriesInc has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. HABA LaboratoriesInc reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If HABA LaboratoriesInc didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 41% of its free cash flow in the past year.

View our latest analysis for HABA LaboratoriesInc

Click here to see how much of its profit HABA LaboratoriesInc paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. HABA LaboratoriesInc was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, HABA LaboratoriesInc has increased its dividend at approximately 7.2% a year on average.

Remember, you can always get a snapshot of HABA LaboratoriesInc's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is HABA LaboratoriesInc worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: HABA LaboratoriesInc has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of HABA LaboratoriesInc don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 3 warning signs for HABA LaboratoriesInc that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.