Be Sure To Check Out Tsukishima Holdings Co., Ltd. (TSE:6332) Before It Goes Ex-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 Tsukishima Holdings Co., Ltd. (TSE:6332) is about to go ex-dividend in just three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Tsukishima Holdings' shares before the 29th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's next dividend payment will be JP¥42.00 per share, and in the last 12 months, the company paid a total of JP¥82.00 per share. Last year's total dividend payments show that Tsukishima Holdings has a trailing yield of 2.8% on the current share price of JP¥2886.00. If you buy this business for its dividend, you should have an idea of whether Tsukishima Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Fortunately Tsukishima Holdings's payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Tsukishima Holdings generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow last year.

It's positive to see that Tsukishima Holdings'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 Tsukishima Holdings

Click here to see how much of its profit Tsukishima Holdings 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Tsukishima Holdings, with earnings per share up 9.8% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Tsukishima Holdings has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Tsukishima Holdings an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Tsukishima Holdings is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Tsukishima Holdings is halfway there. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Tsukishima Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Tsukishima Holdings and you should be aware of it before buying any shares.

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.