Here's Why We're Wary Of Buying Astena Holdings' (TSE:8095) For Its Upcoming 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 Astena Holdings Co., Ltd. (TSE:8095) is about to go ex-dividend in just 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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. Thus, you can purchase Astena Holdings' shares before the 29th of May in order to receive the dividend, which the company will pay on the 12th of August.

The company's next dividend payment will be JP¥9.00 per share. Last year, in total, the company distributed JP¥18.00 to shareholders. Based on the last year's worth of payments, Astena Holdings has a trailing yield of 3.9% on the current stock price of JP¥465.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Astena Holdings has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Astena Holdings paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Astena Holdings 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 distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

View our latest analysis for Astena Holdings

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Astena Holdings 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.

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, Astena Holdings has lifted its dividend by approximately 12% a year on average.

Get our latest analysis on Astena Holdings's balance sheet health here.

Final Takeaway

Is Astena Holdings worth buying for its dividend? It's hard to get used to Astena Holdings 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.

Although, if you're still interested in Astena Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 3 warning signs for Astena Holdings (of which 1 is a bit concerning!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.