Three Days Left To Buy Forum Engineering Inc. (TSE:7088) Before The Ex-Dividend Date

It looks like Forum Engineering Inc. (TSE:7088) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Forum Engineering's shares on or after the 27th of September will not receive the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is JP¥18.00 a share, following on from the last 12 months, when the company distributed a total of JP¥42.50 per share to shareholders. Based on the last year's worth of payments, Forum Engineering stock has a trailing yield of around 4.4% on the current share price of JP¥969.00. If you buy this business for its dividend, you should have an idea of whether Forum Engineering's dividend is reliable and sustainable. As a result, readers should always check whether Forum Engineering has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Forum Engineering

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. Fortunately, it paid out only 42% of its free cash flow in the past 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 Forum Engineering 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. A payout ratio of 82% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Unfortunately Forum Engineering has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Forum Engineering an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, Forum Engineering's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Forum Engineering is facing. To help with this, we've discovered 2 warning signs for Forum Engineering that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.