TKC Corporation (TSE:9746) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy TKC Corporation (TSE:9746) 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. 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. This means that investors who purchase TKC's shares on or after the 29th of September will not receive the dividend, which will be paid on the 23rd of December.

The company's next dividend payment will be JP¥60.00 per share, and in the last 12 months, the company paid a total of JP¥100.00 per share. Based on the last year's worth of payments, TKC stock has a trailing yield of around 2.3% on the current share price of JP¥4295.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are 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. TKC 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 paid out 86% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

See our latest analysis for TKC

Click here to see how much of its profit TKC 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, TKC's earnings per share have been growing at 11% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TKC has delivered 16% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has TKC got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, TKC paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about TKC, and we would prioritise taking a closer look at it.

Want to learn more about TKC? Here's a visualisation of its historical rate of revenue and earnings growth.

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.