Togami Electric Mfg. Co., Ltd. (TSE:6643) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 Togami Electric Mfg. Co., Ltd. (TSE:6643) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Togami Electric Mfg's shares before the 27th of September to receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is JP¥50.00 a share, following on from the last 12 months, when the company distributed a total of JP¥100.00 per share to shareholders. Calculating the last year's worth of payments shows that Togami Electric Mfg has a trailing yield of 2.9% on the current share price of JP¥3395.00. If you buy this business for its dividend, you should have an idea of whether Togami Electric Mfg's dividend is reliable and sustainable. So we need to investigate whether Togami Electric Mfg can afford its dividend, and if the dividend could grow.

See our latest analysis for Togami Electric Mfg

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. Togami Electric Mfg has a low and conservative payout ratio of just 22% of its income after tax. A useful secondary check can be to evaluate whether Togami Electric Mfg generated enough free cash flow to afford its dividend. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 Togami Electric Mfg 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Togami Electric Mfg's earnings per share have risen 14% per annum over the last five years. Togami Electric Mfg is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Togami Electric Mfg has delivered an average of 13% per year annual increase in its dividend, based on the past 10 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

Should investors buy Togami Electric Mfg for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Togami Electric Mfg paid out less than half its earnings and a bit over half its free cash flow. Togami Electric Mfg looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Togami Electric Mfg and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.