Three Days Left To Buy Tohoku Chemical Co., Ltd. (TSE:7446) Before The Ex-Dividend Date

Tohoku Chemical Co., Ltd. (TSE:7446) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Tohoku Chemical's shares on or after the 27th of September will not receive the dividend, which will be paid on the 23rd of December.

The company's next dividend payment will be JP¥95.00 per share, and in the last 12 months, the company paid a total of JP¥95.00 per share. Based on the last year's worth of payments, Tohoku Chemical has a trailing yield of 2.5% on the current stock price of JP¥3745.00. If you buy this business for its dividend, you should have an idea of whether Tohoku Chemical's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Tohoku Chemical

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. Fortunately Tohoku Chemical's payout ratio is modest, at just 37% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 9.6% of its free cash flow as dividends last year, which is conservatively low.

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 Tohoku Chemical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Tohoku Chemical's earnings are down 2.8% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Tohoku Chemical has increased its dividend at approximately 4.7% a year on average.

Final Takeaway

Has Tohoku Chemical got what it takes to maintain its dividend payments? Tohoku Chemical has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Tohoku Chemical is facing. For example - Tohoku Chemical has 2 warning signs we think 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.