Three Days Left To Buy Daiko Denshi Tsushin, Ltd. (TSE:8023) Before The Ex-Dividend Date

It looks like Daiko Denshi Tsushin, Ltd. (TSE:8023) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Daiko Denshi Tsushin's shares before the 28th of March to receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be JP¥30.00 per share, and in the last 12 months, the company paid a total of JP¥30.00 per share. Based on the last year's worth of payments, Daiko Denshi Tsushin stock has a trailing yield of around 3.3% on the current share price of JP¥922.00. 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 Daiko Denshi Tsushin can afford its dividend, and if the dividend could grow.

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. Daiko Denshi Tsushin paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 12% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Daiko Denshi Tsushin

Click here to see how much of its profit Daiko Denshi Tsushin paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. 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 Daiko Denshi Tsushin's earnings per share have dropped 8.4% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Daiko Denshi Tsushin has delivered an average of 33% per year annual increase in its dividend, based on the past eight years of dividend payments.

To Sum It Up

Has Daiko Denshi Tsushin got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Daiko Denshi Tsushin from a dividend perspective.

On that note, you'll want to research what risks Daiko Denshi Tsushin is facing. In terms of investment risks, we've identified 1 warning sign with Daiko Denshi Tsushin and understanding them should be part of your investment process.

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.