There's A Lot To Like About Osaka Organic Chemical Industry's (TSE:4187) Upcoming JP¥34.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Osaka Organic Chemical Industry Ltd. (TSE:4187) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days 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 can take two business days or more to settle. Thus, you can purchase Osaka Organic Chemical Industry's shares before the 29th of May in order to receive the dividend, which the company will pay on the 5th of August.

The company's next dividend payment will be JP¥34.00 per share, and in the last 12 months, the company paid a total of JP¥68.00 per share. Based on the last year's worth of payments, Osaka Organic Chemical Industry stock has a trailing yield of around 2.8% on the current share price of JP¥2448.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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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. That's why it's good to see Osaka Organic Chemical Industry paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Osaka Organic Chemical Industry generated enough free cash flow to afford its dividend. The good news is it paid out just 17% of its free cash flow in the last year.

It's positive to see that Osaka Organic Chemical Industry'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.

View our latest analysis for Osaka Organic Chemical Industry

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Osaka Organic Chemical Industry, with earnings per share up 9.9% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Osaka Organic Chemical Industry has delivered 21% dividend growth per year on average over the past 10 years. 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid Osaka Organic Chemical Industry? Earnings per share have been growing moderately, and Osaka Organic Chemical Industry is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Osaka Organic Chemical Industry is halfway there. Osaka Organic Chemical Industry looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Osaka Organic Chemical Industry for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Osaka Organic Chemical Industry that you should be aware of before investing in their shares.

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.