Should You Buy TRUST Holdings Inc. (TSE:3286) For Its Upcoming Dividend?

It looks like TRUST Holdings Inc. (TSE:3286) is about to go ex-dividend in the next 3 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. Thus, you can purchase TRUST Holdings' shares before the 27th of December in order to receive the dividend, which the company will pay on the 28th of February.

The company's next dividend payment will be JP¥8.00 per share, and in the last 12 months, the company paid a total of JP¥16.00 per share. Based on the last year's worth of payments, TRUST Holdings stock has a trailing yield of around 2.0% on the current share price of JP¥784.00. 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.

See our latest analysis for TRUST Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TRUST Holdings paid out a comfortable 31% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 4.9% of its free cash flow in the last year.

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 TRUST Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at TRUST Holdings, with earnings per share up 4.4% on average over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TRUST Holdings's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Should investors buy TRUST Holdings for the upcoming dividend? Earnings per share have been growing moderately, and TRUST Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and TRUST Holdings is halfway there. There's a lot to like about TRUST Holdings, and we would prioritise taking a closer look at it.

So while TRUST Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - TRUST Holdings has 3 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.