Why You Might Be Interested In Furuno Electric Co., Ltd. (TSE:6814) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Furuno Electric Co., Ltd. (TSE:6814) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Furuno Electric's shares before the 28th of August in order to receive the dividend, which the company will pay on the 13th of November.

The company's next dividend payment will be JP¥55.00 per share. Last year, in total, the company distributed JP¥110 to shareholders. Calculating the last year's worth of payments shows that Furuno Electric has a trailing yield of 2.1% on the current share price of JP¥5190.00. 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 investigate whether Furuno Electric can afford its dividend, and if the dividend could grow.

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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. Fortunately Furuno Electric's payout ratio is modest, at just 25% of profit. 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. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's positive to see that Furuno Electric'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.

Check out our latest analysis for Furuno Electric

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Furuno Electric's earnings have been skyrocketing, up 46% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Furuno Electric has delivered 30% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Furuno Electric for the upcoming dividend? It's great that Furuno Electric is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

So while Furuno Electric looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 3 warning signs with Furuno Electric (at least 1 which makes us a bit uncomfortable), 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.