There's A Lot To Like About Hagiwara Electric Holdings' (TSE:7467) Upcoming JP¥90.00 Dividend

Readers hoping to buy Hagiwara Electric Holdings Co., Ltd. (TSE:7467) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Hagiwara Electric Holdings' shares before the 27th of September to receive the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be JP¥90.00 per share, and in the last 12 months, the company paid a total of JP¥185 per share. Based on the last year's worth of payments, Hagiwara Electric Holdings stock has a trailing yield of around 5.2% on the current share price of JP¥3545.00. If you buy this business for its dividend, you should have an idea of whether Hagiwara Electric Holdings's dividend is reliable and sustainable. So we need to investigate whether Hagiwara Electric Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hagiwara Electric Holdings

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 Hagiwara Electric Holdings paying out a modest 44% of its earnings. A useful secondary check can be to evaluate whether Hagiwara Electric Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Hagiwara Electric Holdings'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 Hagiwara Electric Holdings paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Hagiwara Electric Holdings, with earnings per share up 4.3% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

We'd also point out that Hagiwara Electric Holdings issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hagiwara Electric Holdings has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Hagiwara Electric Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Hagiwara Electric Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Hagiwara Electric Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Hagiwara Electric Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 4 warning signs for Hagiwara Electric Holdings that we strongly recommend you have a look at before investing in the company.

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.