Asagami Corporation (TSE:9311) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Asagami Corporation (TSE:9311) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Asagami's shares before the 28th of March in order to receive the dividend, which the company will pay on the 27th of June.

The company's next dividend payment will be JP¥120.00 per share, and in the last 12 months, the company paid a total of JP¥120 per share. Calculating the last year's worth of payments shows that Asagami has a trailing yield of 2.0% on the current share price of JP¥5950.00. 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! As a result, readers should always check whether Asagami has been able to grow its dividends, or if the dividend might be cut.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Asagami has a low and conservative payout ratio of just 17% of its income after tax. A useful secondary check can be to evaluate whether Asagami generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.2% of its cash flow last year.

It's positive to see that Asagami'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.

See our latest analysis for Asagami

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Asagami's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Asagami is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Asagami has delivered an average of 4.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is Asagami worth buying for its dividend? Earnings per share have been flat over this time, but we're intrigued to see that Asagami is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Asagami is halfway there. Asagami looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Asagami for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Asagami (1 shouldn't be ignored) you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.