Uchida Yoko Co., Ltd. (TSE:8057) Looks Interesting, And It's About To Pay A Dividend

It looks like Uchida Yoko Co., Ltd. (TSE:8057) is about to go ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. In other words, investors can purchase Uchida Yoko's shares before the 16th of July in order to be eligible for the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be JP¥72.00 per share. Last year, in total, the company distributed JP¥72.00 to shareholders. Based on the last year's worth of payments, Uchida Yoko stock has a trailing yield of around 3.4% on the current share price of JP¥2096.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Uchida Yoko is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Uchida Yoko generated enough free cash flow to afford its dividend. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Uchida Yoko'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.

Check out our latest analysis for Uchida Yoko

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Uchida Yoko has grown its earnings rapidly, up 31% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Uchida Yoko looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Uchida Yoko has delivered 22% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Uchida Yoko for the upcoming dividend? We love that Uchida Yoko is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Uchida Yoko for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Uchida Yoko and understanding them should be part of your investment process.

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.