Tokyo Kiraboshi Financial Group (TSE:7173) Could Be A Buy For Its Upcoming Dividend

Tokyo Kiraboshi Financial Group, Inc. (TSE:7173) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, 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 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 Tokyo Kiraboshi Financial Group's shares before the 27th of September to receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥75.00 per share, and in the last 12 months, the company paid a total of JP¥150 per share. Calculating the last year's worth of payments shows that Tokyo Kiraboshi Financial Group has a trailing yield of 3.5% on the current share price of JP¥4235.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Tokyo Kiraboshi Financial Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Tokyo Kiraboshi Financial Group

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. Tokyo Kiraboshi Financial Group has a low and conservative payout ratio of just 17% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Tokyo Kiraboshi Financial Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Tokyo Kiraboshi Financial Group's earnings have been skyrocketing, up 41% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tokyo Kiraboshi Financial Group has delivered an average of 11% per year annual increase in its dividend, based on the past nine years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has Tokyo Kiraboshi Financial Group got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Tokyo Kiraboshi Financial Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Tokyo Kiraboshi Financial Group is facing. Case in point: We've spotted 1 warning sign for Tokyo Kiraboshi Financial Group you should be aware of.

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.