Ozu Corporation (TSE:7487) Is About To Go Ex-Dividend, And It Pays A 1.4% Yield

Ozu Corporation (TSE:7487) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Ozu investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 29th of August.

The company's next dividend payment will be JP¥25.00 per share, on the back of last year when the company paid a total of JP¥25.00 to shareholders. Last year's total dividend payments show that Ozu has a trailing yield of 1.4% on the current share price of JP¥1780.00. If you buy this business for its dividend, you should have an idea of whether Ozu's dividend is reliable and sustainable. As a result, readers should always check whether Ozu has been able to grow its dividends, or if the dividend might be cut.

Our free stock report includes 1 warning sign investors should be aware of before investing in Ozu. Read for free now.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Ozu's payout ratio is modest, at just 46% of profit. A useful secondary check can be to evaluate whether Ozu generated enough free cash flow to afford its dividend. The company paid out 94% 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.

Ozu 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 Ozu's ability to maintain its dividend.

Check out our latest analysis for Ozu

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Ozu's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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, Ozu has lifted its dividend by approximately 7.6% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Ozu? Earnings per share have barely grown in this time, and although Ozu is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. In summary, it's hard to get excited about Ozu from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Ozu, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for Ozu you should know about.

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.