It Might Not Be A Great Idea To Buy Future Innovation Group, Inc. (TSE:4392) For Its Next Dividend

Readers hoping to buy Future Innovation Group, Inc. (TSE:4392) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Meaning, you will need to purchase Future Innovation Group's shares before the 29th of December to receive the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be JP¥10.00 per share, and in the last 12 months, the company paid a total of JP¥10.00 per share. Based on the last year's worth of payments, Future Innovation Group stock has a trailing yield of around 3.3% on the current share price of JP¥302.00. 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.

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.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Future Innovation Group reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 9.4% of its free cash flow last year.

Check out our latest analysis for Future Innovation Group

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Future Innovation Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Future Innovation Group has delivered 7.2% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of Future Innovation Group's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Future Innovation Group worth buying for its dividend? It's hard to get used to Future Innovation Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Future Innovation Group is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Future Innovation Group and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 3 warning signs for Future Innovation Group (1 shouldn't be ignored!) that deserve your attention before investing in the 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.