We Wouldn't Be Too Quick To Buy Harima Chemicals Group, Inc. (TSE:4410) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Harima Chemicals Group, Inc. (TSE:4410) is about to go ex-dividend in just 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 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. This means that investors who purchase Harima Chemicals Group's shares on or after the 28th of March will not receive the dividend, which will be paid on the 23rd of June.

The company's next dividend payment will be JP¥21.00 per share, and in the last 12 months, the company paid a total of JP¥42.00 per share. Last year's total dividend payments show that Harima Chemicals Group has a trailing yield of 4.7% on the current share price of JP¥886.00. 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! We need to see whether the dividend is covered by earnings and if it's growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Harima Chemicals Group lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Harima Chemicals Group 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. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.

View our latest analysis for Harima Chemicals Group

Click here to see how much of its profit Harima Chemicals Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Harima Chemicals Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Harima Chemicals Group has delivered 12% dividend growth per year on average over the past 10 years.

Get our latest analysis on Harima Chemicals Group's balance sheet health here.

To Sum It Up

Should investors buy Harima Chemicals Group for the upcoming dividend? It's hard to get used to Harima Chemicals Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that being said, if you're still considering Harima Chemicals Group as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 3 warning signs for Harima Chemicals Group (2 can't be ignored!) that deserve your attention before investing in the 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.