TBK Co., Ltd. (TSE:7277) Will Pay A JP¥4.00 Dividend In Three Days

TBK Co., Ltd. (TSE:7277) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase TBK's shares before the 29th of September to receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be JP¥4.00 per share, on the back of last year when the company paid a total of JP¥8.00 to shareholders. Calculating the last year's worth of payments shows that TBK has a trailing yield of 2.4% on the current share price of JP¥339.00. 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! So we need to investigate whether TBK can afford its dividend, and if the dividend could grow.

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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. TBK paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If TBK didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.

Check out our latest analysis for TBK

Click here to see how much of its profit TBK 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. TBK reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TBK has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see.

Remember, you can always get a snapshot of TBK's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Has TBK got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of TBK's dividend merits.

On that note, you'll want to research what risks TBK is facing. Our analysis shows 2 warning signs for TBK and you should be aware of these before buying any shares.

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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.