Imasen Electric Industrial Co., Ltd. (TSE:7266) Looks Interesting, And It's About To Pay A Dividend
Imasen Electric Industrial Co., Ltd. (TSE:7266) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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 Imasen Electric Industrial's shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥16.00 per share, on the back of last year when the company paid a total of JP¥32.00 to shareholders. Last year's total dividend payments show that Imasen Electric Industrial has a trailing yield of 3.2% on the current share price of JP¥992.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's 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. Imasen Electric Industrial paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Imasen Electric Industrial'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 Imasen Electric Industrial
Click here to see how much of its profit Imasen Electric Industrial 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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Imasen Electric Industrial has grown its earnings rapidly, up 52% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Imasen Electric Industrial has lifted its dividend by approximately 0.6% 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.
The Bottom Line
From a dividend perspective, should investors buy or avoid Imasen Electric Industrial? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Imasen Electric Industrial, and we would prioritise taking a closer look at it.
In light of that, while Imasen Electric Industrial has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Imasen Electric Industrial 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.