Just Four Days Till Ohara Inc. (TSE:5218) Will Be Trading Ex-Dividend

Readers hoping to buy Ohara Inc. (TSE:5218) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Ohara's shares on or after the 30th of October will not receive the dividend, which will be paid on the 28th of January.

The company's next dividend payment will be JP¥23.00 per share, and in the last 12 months, the company paid a total of JP¥23.00 per share. Last year's total dividend payments show that Ohara has a trailing yield of 1.8% on the current share price of JP¥1271.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Ohara

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Ohara paying out a modest 41% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Ohara'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 how much of its profit Ohara 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. Readers will understand then, why we're concerned to see Ohara's earnings per share have dropped 18% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Ohara has increased its dividend at approximately 8.7% a year on average.

The Bottom Line

Is Ohara an attractive dividend stock, or better left on the shelf? Ohara 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 Ohara's dividend merits.

In light of that, while Ohara has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Ohara is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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.