Hakudo Co., Ltd. (TSE:7637) Stock Goes Ex-Dividend In Just Three Days

Hakudo Co., Ltd. (TSE:7637) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. Accordingly, Hakudo investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 11th of December.

The company's next dividend payment will be JP¥49.00 per share. Last year, in total, the company distributed JP¥85.00 to shareholders. Based on the last year's worth of payments, Hakudo has a trailing yield of 3.4% on the current stock price of JP¥2467.00. If you buy this business for its dividend, you should have an idea of whether Hakudo's dividend is reliable and sustainable. As a result, readers should always check whether Hakudo has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hakudo

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. Hakudo paid out a comfortable 43% of its profit last year. 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. The company paid out 99% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Hakudo paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Hakudo's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Hakudo earnings per share are up 6.4% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Hakudo has lifted its dividend by approximately 11% a year on average. 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

Is Hakudo an attractive dividend stock, or better left on the shelf? Hakudo has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Hakudo as a potential investment, you should definitely consider some of the risks involved with Hakudo. Our analysis shows 1 warning sign for Hakudo and you should be aware of this before buying any 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.