Just Three Days Till Hamamatsu Photonics K.K. (TSE:6965) Will Be Trading Ex-Dividend

Readers hoping to buy Hamamatsu Photonics K.K. (TSE:6965) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Hamamatsu Photonics K.K's shares before the 27th of September in order to receive the dividend, which the company will pay on the 25th of December.

The company's next dividend payment will be JP¥38.00 per share, on the back of last year when the company paid a total of JP¥76.00 to shareholders. Last year's total dividend payments show that Hamamatsu Photonics K.K has a trailing yield of 2.2% on the current share price of JP¥3440.00. 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 Hamamatsu Photonics K.K can afford its dividend, and if the dividend could grow.

View our latest analysis for Hamamatsu Photonics K.K

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hamamatsu Photonics K.K paid out a comfortable 38% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 96% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Hamamatsu Photonics K.K paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Hamamatsu Photonics K.K's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Hamamatsu Photonics K.K, with earnings per share up 7.8% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Hamamatsu Photonics K.K has lifted its dividend by approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Hamamatsu Photonics K.K for the upcoming dividend? Hamamatsu Photonics K.K delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 96% of its cash flow over the last year, which is a mediocre outcome. To summarise, Hamamatsu Photonics K.K looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Hamamatsu Photonics K.K, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 1 warning sign for Hamamatsu Photonics K.K that we recommend you consider before investing in the business.

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.