Should Income Investors Look At Takeda Machinery Co., Ltd. (TSE:6150) Before Its Ex-Dividend?
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 Takeda Machinery Co., Ltd. (TSE:6150) is about to go ex-dividend in just 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Takeda Machinery's shares before the 28th of May to receive the dividend, which will be paid on the 31st of August.
The company's next dividend payment will be JP¥80.00 per share. Last year, in total, the company distributed JP¥80.00 to shareholders. Calculating the last year's worth of payments shows that Takeda Machinery has a trailing yield of 2.6% on the current share price of JP¥3095.00. If you buy this business for its dividend, you should have an idea of whether Takeda Machinery's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Takeda Machinery paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Takeda Machinery generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Takeda Machinery
Click here to see how much of its profit Takeda Machinery paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Takeda Machinery's earnings per share have dropped 8.4% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Takeda Machinery has lifted its dividend by approximately 4.8% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Takeda Machinery? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Takeda Machinery from a dividend perspective.
In light of that, while Takeda Machinery has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Takeda Machinery you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.