Super Tool Co. Ltd. (TSE:5990) Will Pay A JP¥35.00 Dividend In Four Days

Super Tool Co. Ltd. (TSE:5990) stock is about to trade ex-dividend in 4 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Super Tool's shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 18th of November.

The company's upcoming dividend is JP¥35.00 a share, following on from the last 12 months, when the company distributed a total of JP¥70.00 per share to shareholders. Based on the last year's worth of payments, Super Tool stock has a trailing yield of around 3.6% on the current share price of JP¥1971.00. If you buy this business for its dividend, you should have an idea of whether Super Tool's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Super Tool

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. Super Tool paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Super Tool generated enough free cash flow to afford its dividend. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Super Tool's earnings per share have dropped 14% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Super Tool has seen its dividend decline 0.7% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Has Super Tool got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, while it has some positive characteristics, we're not inclined to race out and buy Super Tool today.

However if you're still interested in Super Tool as a potential investment, you should definitely consider some of the risks involved with Super Tool. Our analysis shows 3 warning signs for Super Tool that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.