Koito Manufacturing Co., Ltd. (TSE:7276) Stock Goes Ex-Dividend In Just One Day
It looks like Koito Manufacturing Co., Ltd. (TSE:7276) is about to go ex-dividend in the next day or two. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Koito Manufacturing investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be JP¥28.00 per share, and in the last 12 months, the company paid a total of JP¥58.00 per share. Looking at the last 12 months of distributions, Koito Manufacturing has a trailing yield of approximately 2.2% on its current stock price of JP¥2690.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Koito Manufacturing paid out 72% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's positive to see that Koito Manufacturing'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.
View our latest analysis for Koito Manufacturing
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Koito Manufacturing's earnings per share have fallen at approximately 6.9% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
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, Koito Manufacturing has lifted its dividend by approximately 14% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
The Bottom Line
Should investors buy Koito Manufacturing for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Koito Manufacturing from a dividend perspective.
If you want to look further into Koito Manufacturing, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 3 warning signs with Koito Manufacturing and understanding them should be part of your investment process.
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.