TOLI (TSE:7971) Could Be A Buy For Its Upcoming Dividend

TOLI Corporation (TSE:7971) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day 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. 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. In other words, investors can purchase TOLI's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 29th of November.

The company's next dividend payment will be JP¥5.00 per share, and in the last 12 months, the company paid a total of JP¥19.00 per share. Last year's total dividend payments show that TOLI has a trailing yield of 4.9% on the current share price of JP¥384.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for TOLI

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TOLI paid out a comfortable 31% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (52%) of its free cash flow in the past year, which is within an average range for most companies.

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 TOLI 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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see TOLI has grown its earnings rapidly, up 23% a year for 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 last 10 years, TOLI has lifted its dividend by approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is TOLI an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, TOLI paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about TOLI, and we would prioritise taking a closer look at it.

Curious about whether TOLI has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.