Onward Holdings Co., Ltd. (TSE:8016) Will Pay A JP¥16.00 Dividend In Four Days
Readers hoping to buy Onward Holdings Co., Ltd. (TSE:8016) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. Accordingly, Onward Holdings investors that purchase the stock on or after the 28th of August will not receive the dividend, which will be paid on the 10th of November.
The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥33.00 to shareholders. Based on the last year's worth of payments, Onward Holdings stock has a trailing yield of around 4.3% on the current share price of JP¥772.00. 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.
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. Onward Holdings paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Onward Holdings generated enough free cash flow to afford its dividend. Onward Holdings paid out more free cash flow than it generated - 191%, 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.
Onward Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Onward Holdings's ability to maintain its dividend.
See our latest analysis for Onward 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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Onward Holdings has grown its earnings rapidly, up 41% a year for the past five years. Earnings have been growing quickly, 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. Since the start of our data, 10 years ago, Onward Holdings has lifted its dividend by approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Onward Holdings is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid Onward Holdings? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
While it's tempting to invest in Onward Holdings for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Onward Holdings you should be aware of.
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.