Interested In Takeda Pharmaceutical's (TSE:4502) Upcoming JP¥100.00 Dividend? You Have Three Days Left

It looks like Takeda Pharmaceutical Company Limited (TSE:4502) is about to go ex-dividend in the next 3 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Takeda Pharmaceutical's shares before the 29th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's next dividend payment will be JP¥100.00 per share, and in the last 12 months, the company paid a total of JP¥200 per share. Based on the last year's worth of payments, Takeda Pharmaceutical has a trailing yield of 4.5% on the current stock price of JP¥4456.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. An unusually high payout ratio of 226% of its profit suggests something is happening other than the usual distribution of profits to shareholders. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Takeda Pharmaceutical fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Check out our latest analysis for Takeda Pharmaceutical

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. That's why it's comforting to see Takeda Pharmaceutical's earnings have been skyrocketing, up 25% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Takeda Pharmaceutical has lifted its dividend by approximately 1.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Takeda Pharmaceutical is keeping back more of its profits to grow the business.

The Bottom Line

Has Takeda Pharmaceutical got what it takes to maintain its dividend payments? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Takeda Pharmaceutical's paying out such a high percentage of its profit. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Takeda Pharmaceutical for the dividends alone, you should always be mindful of the risks involved. For example - Takeda Pharmaceutical has 3 warning signs we think you should be aware of.

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.