AOKI Holdings (TSE:8214) Could Be A Buy For Its Upcoming Dividend

AOKI Holdings Inc. (TSE:8214) stock is about to trade ex-dividend in three days. 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. This means that investors who purchase AOKI Holdings' shares on or after the 28th of March will not receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be JP¥40.00 per share. Last year, in total, the company distributed JP¥55.00 to shareholders. Looking at the last 12 months of distributions, AOKI Holdings has a trailing yield of approximately 4.2% on its current stock price of JP¥1301.00. 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 AOKI Holdings 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. AOKI Holdings paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether AOKI Holdings generated enough free cash flow to afford its dividend. Fortunately, it paid out only 28% of its free cash flow in the past 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 AOKI Holdings

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, AOKI Holdings's earnings per share have been growing at 13% a year for the past five years. AOKI Holdings has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AOKI Holdings has delivered 4.3% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because AOKI Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Has AOKI Holdings got what it takes to maintain its dividend payments? We like AOKI Holdings's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about AOKI Holdings, and we would prioritise taking a closer look at it.

In light of that, while AOKI Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for AOKI Holdings and you should be aware of this before buying any 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.