TOMY Company, Ltd. (TSE:7867) Looks Interesting, And It's About To Pay A Dividend

TOMY Company, Ltd. (TSE:7867) stock is about to trade ex-dividend in three 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. Accordingly, TOMY Company investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be JP¥24.00 per share. Last year, in total, the company distributed JP¥48.00 to shareholders. Calculating the last year's worth of payments shows that TOMY Company has a trailing yield of 1.2% on the current share price of JP¥3911.00. 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.

Check out our latest analysis for TOMY Company

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see TOMY Company paying out a modest 36% of its earnings. A useful secondary check can be to evaluate whether TOMY Company generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see TOMY Company earnings per share are up 3.7% per annum over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TOMY Company has delivered 17% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid TOMY Company? Earnings per share have been growing moderately, and TOMY Company 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. It might be nice to see earnings growing faster, but TOMY Company is being conservative with its dividend payouts and could still perform reasonably over the long run. TOMY Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of TOMY Company? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.