West Japan Railway Company (TSE:9021) Goes Ex-Dividend Soon

It looks like West Japan Railway Company (TSE:9021) is about to go ex-dividend in the next three days. 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 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, West Japan Railway investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥36.00 per share, on the back of last year when the company paid a total of JP¥72.00 to shareholders. Based on the last year's worth of payments, West Japan Railway stock has a trailing yield of around 2.7% on the current share price of JP¥2701.00. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for West Japan Railway

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately West Japan Railway's payout ratio is modest, at just 33% of profit. A useful secondary check can be to evaluate whether West Japan Railway generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 47% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that West Japan Railway'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see West Japan Railway's earnings per share have been shrinking at 3.7% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, West Japan Railway has lifted its dividend by approximately 2.7% a year on average.

The Bottom Line

Is West Japan Railway worth buying for its dividend? West Japan Railway has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, West Japan Railway looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for West Japan Railway and you should be aware of these before buying any shares.

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.