Toyota Tsusho Corporation (TSE:8015) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Toyota Tsusho Corporation (TSE:8015) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Meaning, you will need to purchase Toyota Tsusho's shares before the 28th of March to receive the dividend, which will be paid on the 24th of June.

The company's next dividend payment will be JP¥50.00 per share, on the back of last year when the company paid a total of JP¥100.00 to shareholders. Based on the last year's worth of payments, Toyota Tsusho stock has a trailing yield of around 3.7% on the current share price of JP¥2672.00. If you buy this business for its dividend, you should have an idea of whether Toyota Tsusho's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Toyota Tsusho paid out a comfortable 45% 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 distributed 40% of its free cash flow as dividends, a comfortable payout level 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.

View our latest analysis for Toyota Tsusho

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Toyota Tsusho's earnings have been skyrocketing, up 21% per annum for the past five years. Toyota Tsusho is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

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, Toyota Tsusho has lifted its dividend by approximately 18% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Toyota Tsusho got what it takes to maintain its dividend payments? Toyota Tsusho has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Toyota Tsusho, and we would prioritise taking a closer look at it.

In light of that, while Toyota Tsusho has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Toyota Tsusho that we recommend you consider before investing in the business.

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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.