Is It Worth Considering Tigers Polymer Corporation (TSE:4231) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tigers Polymer Corporation (TSE:4231) is about to go ex-dividend in just three 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Tigers Polymer's shares on or after the 28th of March will not receive the dividend, which will be paid on the 30th of June.

The company's next dividend payment will be JP¥17.00 per share, on the back of last year when the company paid a total of JP¥34.00 to shareholders. Calculating the last year's worth of payments shows that Tigers Polymer has a trailing yield of 4.5% on the current share price of JP¥761.00. If you buy this business for its dividend, you should have an idea of whether Tigers Polymer's dividend is reliable and sustainable. As a result, readers should always check whether Tigers Polymer has been able to grow its dividends, or if the dividend might be cut.

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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. Tigers Polymer is paying out an acceptable 55% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Tigers Polymer generated enough free cash flow to afford its dividend. Luckily it paid out just 9.0% of its free cash flow last year.

It's positive to see that Tigers Polymer'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 Tigers Polymer

Click here to see how much of its profit Tigers Polymer paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Tigers Polymer's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Tigers Polymer has increased its dividend at approximately 11% a year on average.

Final Takeaway

Is Tigers Polymer an attractive dividend stock, or better left on the shelf? Earnings per share have been flat and Tigers Polymer's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Tigers Polymer has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Tigers Polymer you should be aware of.

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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.