Just Three Days Till Uoriki Co., Ltd. (TSE:7596) Will Be Trading Ex-Dividend
Uoriki Co., Ltd. (TSE:7596) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Uoriki's shares before the 29th of September to receive the dividend, which will be paid on the 11th of December.
The company's next dividend payment will be JP¥26.00 per share. Last year, in total, the company distributed JP¥52.00 to shareholders. Looking at the last 12 months of distributions, Uoriki has a trailing yield of approximately 2.2% on its current stock price of JP¥2339.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Uoriki paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Uoriki generated enough free cash flow to afford its dividend. Over the past year it paid out 157% of its free cash flow as dividends, which is uncomfortably 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.
Uoriki does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
While Uoriki'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. Cash is king, as they say, and were Uoriki to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Check out our latest analysis for Uoriki
Click here to see how much of its profit Uoriki paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Uoriki, with earnings per share up 8.5% 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.
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, Uoriki has lifted its dividend by approximately 2.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Uoriki? Uoriki is paying out a reasonable percentage of its income and an uncomfortably high 157% of its cash flow as dividends. At least earnings per share have been growing steadily. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
With that in mind though, if the poor dividend characteristics of Uoriki don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 1 warning sign for Uoriki that we recommend you consider before investing in the business.
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.