Income Investors Should Know That Tsubakimoto Kogyo Co., Ltd. (TSE:8052) Goes 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 Tsubakimoto Kogyo Co., Ltd. (TSE:8052) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Tsubakimoto Kogyo investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is JP¥15.00 a share, following on from the last 12 months, when the company distributed a total of JP¥60.00 per share to shareholders. Last year's total dividend payments show that Tsubakimoto Kogyo has a trailing yield of 3.4% on the current share price of JP¥1772.00. If you buy this business for its dividend, you should have an idea of whether Tsubakimoto Kogyo's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Tsubakimoto Kogyo

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tsubakimoto Kogyo paid out a comfortable 30% 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 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Tsubakimoto Kogyo'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.

Click here to see how much of its profit Tsubakimoto Kogyo 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. That's why it's not ideal to see Tsubakimoto Kogyo's earnings per share have been shrinking at 2.8% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Tsubakimoto Kogyo has lifted its dividend by approximately 16% a year on average.

The Bottom Line

Has Tsubakimoto Kogyo got what it takes to maintain its dividend payments? Tsubakimoto Kogyo 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. In summary, while it has some positive characteristics, we're not inclined to race out and buy Tsubakimoto Kogyo today.

Keen to explore more data on Tsubakimoto Kogyo's financial performance? Check out our visualisation 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.