United Arrows Ltd. (TSE:7606) Pays A JP¥17.00 Dividend In Just Three Days

Readers hoping to buy United Arrows Ltd. (TSE:7606) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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. Accordingly, United Arrows investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 6th of December.

The company's next dividend payment will be JP¥17.00 per share. Last year, in total, the company distributed JP¥55.00 to shareholders. Last year's total dividend payments show that United Arrows has a trailing yield of 2.6% on the current share price of JP¥2148.00. If you buy this business for its dividend, you should have an idea of whether United Arrows's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for United Arrows

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. United Arrows paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether United Arrows generated enough free cash flow to afford its dividend. Fortunately, it paid out only 25% of its free cash flow in the past year.

It's positive to see that United Arrows's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. That's why it's not ideal to see United Arrows's earnings per share have been shrinking at 5.0% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Arrows has seen its dividend decline 1.0% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Has United Arrows got what it takes to maintain its dividend payments? United Arrows has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of United Arrows's dividend merits.

While it's tempting to invest in United Arrows for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for United Arrows that you should be aware of before investing in their shares.

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.