Why You Might Be Interested In Ohishi Sangyo Co., Ltd. (TSE:3943) For Its Upcoming Dividend

It looks like Ohishi Sangyo Co., Ltd. (TSE:3943) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Ohishi Sangyo's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 2nd of December.

The company's next dividend payment will be JP¥32.00 per share, on the back of last year when the company paid a total of JP¥64.00 to shareholders. Based on the last year's worth of payments, Ohishi Sangyo has a trailing yield of 3.0% on the current stock price of JP¥2111.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Ohishi Sangyo

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ohishi Sangyo paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Over the last year it paid out 52% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Ohishi Sangyo'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 Ohishi Sangyo paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Ohishi Sangyo's earnings per share have been growing at 15% a year for the past five years. Ohishi Sangyo has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ohishi Sangyo has delivered an average of 6.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Ohishi Sangyo an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Ohishi Sangyo paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Ohishi Sangyo, and we would prioritise taking a closer look at it.

In light of that, while Ohishi Sangyo has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Ohishi Sangyo 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.