Why You Might Be Interested In OPTEX GROUP Company, Limited (TSE:6914) For Its Upcoming Dividend

OPTEX GROUP Company, Limited (TSE:6914) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Accordingly, OPTEX GROUP Company investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 3rd of September.

The company's next dividend payment will be JP¥22.50 per share, and in the last 12 months, the company paid a total of JP¥45.00 per share. Based on the last year's worth of payments, OPTEX GROUP Company has a trailing yield of 2.8% on the current stock price of JP¥1594.00. 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 check whether the dividend payments are covered, and if earnings are growing.

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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. OPTEX GROUP Company paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 paid out 24% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that OPTEX GROUP Company'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 OPTEX GROUP Company

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see OPTEX GROUP Company's earnings have been skyrocketing, up 24% per annum for the past five years. OPTEX GROUP Company looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, OPTEX GROUP Company has lifted its dividend by approximately 12% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid OPTEX GROUP Company? OPTEX GROUP Company 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.

While it's tempting to invest in OPTEX GROUP Company for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for OPTEX GROUP Company and you should be aware of it before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.