Why You Might Be Interested In Iwabuchi Corporation (TSE:5983) For Its Upcoming Dividend
Iwabuchi Corporation (TSE:5983) is about to trade ex-dividend in the next 2 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. In other words, investors can purchase Iwabuchi's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥165.00 per share, on the back of last year when the company paid a total of JP¥330 to shareholders. Calculating the last year's worth of payments shows that Iwabuchi has a trailing yield of 2.4% on the current share price of JP¥13990.00. If you buy this business for its dividend, you should have an idea of whether Iwabuchi's dividend is reliable and sustainable. So we need to investigate whether Iwabuchi can afford its dividend, and if the dividend could grow.
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. Fortunately Iwabuchi's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether Iwabuchi generated enough free cash flow to afford its dividend. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Iwabuchi'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.
See our latest analysis for Iwabuchi
Click here to see how much of its profit Iwabuchi paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Iwabuchi's earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Iwabuchi has increased its dividend at approximately 5.1% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
From a dividend perspective, should investors buy or avoid Iwabuchi? Iwabuchi has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
So while Iwabuchi looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Iwabuchi that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.