ARIAKE JAPAN Co., Ltd. (TSE:2815) Is About To Go Ex-Dividend, And It Pays A 3.4% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that ARIAKE JAPAN Co., Ltd. (TSE:2815) is about to go ex-dividend in just three days. The ex-dividend date is commonly two business days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase ARIAKE JAPAN's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 8th of December.

The company's next dividend payment will be JP¥60.00 per share, and in the last 12 months, the company paid a total of JP¥180 per share. Last year's total dividend payments show that ARIAKE JAPAN has a trailing yield of 3.4% on the current share price of JP¥5250.00. If you buy this business for its dividend, you should have an idea of whether ARIAKE JAPAN's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. ARIAKE JAPAN paid out 62% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that ARIAKE JAPAN'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 ARIAKE JAPAN

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at ARIAKE JAPAN, with earnings per share up 4.8% on average over the last five years. A high payout ratio of 62% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, ARIAKE JAPAN could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ARIAKE JAPAN has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has ARIAKE JAPAN got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and ARIAKE JAPAN paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about ARIAKE JAPAN from a dividend perspective.

Curious what other investors think of ARIAKE JAPAN? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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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.