Should You Buy Yamaichi Uniheim Real Estate Co.,Ltd (TSE:2984) For Its Upcoming Dividend?

It looks like Yamaichi Uniheim Real Estate Co.,Ltd (TSE:2984) is about to go ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Yamaichi Uniheim Real EstateLtd's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 27th of June.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Based on the last year's worth of payments, Yamaichi Uniheim Real EstateLtd has a trailing yield of 3.9% on the current stock price of JP¥771.00. If you buy this business for its dividend, you should have an idea of whether Yamaichi Uniheim Real EstateLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. Fortunately Yamaichi Uniheim Real EstateLtd's payout ratio is modest, at just 27% of profit. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 6.4% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Yamaichi Uniheim Real EstateLtd

Click here to see how much of its profit Yamaichi Uniheim Real EstateLtd paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Yamaichi Uniheim Real EstateLtd, with earnings per share up 4.2% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Yamaichi Uniheim Real EstateLtd also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Yamaichi Uniheim Real EstateLtd's dividend payments are effectively flat on where they were two years ago.

The Bottom Line

Has Yamaichi Uniheim Real EstateLtd got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Yamaichi Uniheim Real EstateLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Yamaichi Uniheim Real EstateLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. Yamaichi Uniheim Real EstateLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Yamaichi Uniheim Real EstateLtd has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 4 warning signs for Yamaichi Uniheim Real EstateLtd (2 make us uncomfortable) you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.