Here's Why We're Wary Of Buying Dualtap's (TSE:3469) For Its Upcoming Dividend

Readers hoping to buy Dualtap Co., Ltd. (TSE:3469) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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. 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. Accordingly, Dualtap investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be JP¥12.50 per share, and in the last 12 months, the company paid a total of JP¥12.50 per share. Calculating the last year's worth of payments shows that Dualtap has a trailing yield of 1.2% on the current share price of JP¥1087.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Dualtap can afford its dividend, and if the dividend could grow.

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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. Dualtap reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Dualtap 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. What's good is that dividends were well covered by free cash flow, with the company paying out 1.8% of its cash flow last year.

Check out our latest analysis for Dualtap

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Dualtap 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dualtap has delivered 2.8% dividend growth per year on average over the past eight years.

We update our analysis on Dualtap every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Is Dualtap worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." 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 in mind though, if the poor dividend characteristics of Dualtap don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Dualtap is showing 3 warning signs in our investment analysis, and 2 of those are significant...

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.