Why You Might Be Interested In Aoyama Trading Co., Ltd. (TSE:8219) For Its Upcoming Dividend

It looks like Aoyama Trading Co., Ltd. (TSE:8219) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Aoyama Trading's shares on or after the 27th of September will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥30.00 per share, on the back of last year when the company paid a total of JP¥61.00 to shareholders. Based on the last year's worth of payments, Aoyama Trading has a trailing yield of 4.5% on the current stock price of JP¥1355.00. If you buy this business for its dividend, you should have an idea of whether Aoyama Trading's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Aoyama Trading

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. That's why it's good to see Aoyama Trading paying out a modest 31% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

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.

Click here to see how much of its profit Aoyama Trading 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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Aoyama Trading's earnings per share have risen 11% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Aoyama Trading's dividend payments per share have declined at 1.4% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Has Aoyama Trading got what it takes to maintain its dividend payments? Aoyama Trading has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Aoyama Trading has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with Aoyama Trading (at least 1 which can't be ignored), and understanding these should be part of your investment process.

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.