Only Three Days Left To Cash In On Itoham Yonekyu Holdings' (TSE:2296) Dividend

Itoham Yonekyu Holdings Inc. (TSE:2296) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase Itoham Yonekyu Holdings' shares on or after the 29th of December will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥90.00 per share, and in the last 12 months, the company paid a total of JP¥145 per share. Calculating the last year's worth of payments shows that Itoham Yonekyu Holdings has a trailing yield of 2.6% on the current share price of JP¥5640.00. If you buy this business for its dividend, you should have an idea of whether Itoham Yonekyu Holdings'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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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Itoham Yonekyu Holdings is paying out an acceptable 50% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Itoham Yonekyu Holdings paid out more free cash flow than it generated - 138%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Itoham Yonekyu Holdings'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 Itoham Yonekyu Holdings's ability to maintain its dividend.

View our latest analysis for Itoham Yonekyu Holdings

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Itoham Yonekyu Holdings, with earnings per share up 8.3% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, nine years ago, Itoham Yonekyu Holdings has lifted its dividend by approximately 7.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Itoham Yonekyu Holdings worth buying for its dividend? Earnings per share have grown somewhat, although Itoham Yonekyu Holdings paid out over half its profits and the dividend was not well covered by free cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Wondering what the future holds for Itoham Yonekyu Holdings? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.