Just Three Days Till YASKAWA Electric Corporation (TSE:6506) Will Be Trading Ex-Dividend

YASKAWA Electric Corporation (TSE:6506) stock is about to trade ex-dividend in 3 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 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. Therefore, if you purchase YASKAWA Electric's shares on or after the 28th of August, you won't be eligible to receive the dividend, when it is paid on the 4th of November.

The company's upcoming dividend is JP¥36.00 a share, following on from the last 12 months, when the company distributed a total of JP¥72.00 per share to shareholders. Calculating the last year's worth of payments shows that YASKAWA Electric has a trailing yield of 1.4% on the current share price of JP¥4979.00. 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. YASKAWA Electric is paying out an acceptable 52% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. YASKAWA Electric paid out more free cash flow than it generated - 118%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While YASKAWA Electric's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to YASKAWA Electric's ability to maintain its dividend.

Check out our latest analysis for YASKAWA Electric

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. For this reason, we're glad to see YASKAWA Electric's earnings per share have risen 12% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, YASKAWA Electric has increased its dividend at approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has YASKAWA Electric got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 118% of its cashflow, which is uncomfortably high. All things considered, we are not particularly enthused about YASKAWA Electric from a dividend perspective.

So if you want to do more digging on YASKAWA Electric, you'll find it worthwhile knowing the risks that this stock faces. Be aware that YASKAWA Electric is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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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.