Be Sure To Check Out Takihyo Co., Ltd. (TSE:9982) Before It Goes Ex-Dividend

Takihyo Co., Ltd. (TSE:9982) is about to trade ex-dividend in the next 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Takihyo's shares on or after the 27th of February, you won't be eligible to receive the dividend, when it is paid on the 30th of May.

The company's next dividend payment will be JP¥20.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Last year's total dividend payments show that Takihyo has a trailing yield of 2.0% on the current share price of JP¥1521.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Takihyo has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Takihyo

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. Takihyo has a low and conservative payout ratio of just 13% of its income after tax. A useful secondary check can be to evaluate whether Takihyo generated enough free cash flow to afford its dividend. It paid out 9.5% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Takihyo'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 Takihyo 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Takihyo has grown its earnings rapidly, up 37% a year for the past five years. Takihyo looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Takihyo has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

From a dividend perspective, should investors buy or avoid Takihyo? Takihyo has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Takihyo is facing. Our analysis shows 3 warning signs for Takihyo and you should be aware of them before buying any shares.

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.