Tokyo Individualized Educational Institute, Inc. (TSE:4745) Is About To Go Ex-Dividend, And It Pays A 3.4% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tokyo Individualized Educational Institute, Inc. (TSE:4745) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Tokyo Individualized Educational Institute's shares before the 27th of February in order to receive the dividend, which the company will pay on the 30th of May.

The company's next dividend payment will be JP¥6.00 per share, on the back of last year when the company paid a total of JP¥12.00 to shareholders. Looking at the last 12 months of distributions, Tokyo Individualized Educational Institute has a trailing yield of approximately 3.4% on its current stock price of JP¥350.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Tokyo Individualized Educational Institute

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. Fortunately Tokyo Individualized Educational Institute's payout ratio is modest, at just 39% of profit. 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. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Tokyo Individualized Educational Institute'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tokyo Individualized Educational Institute's earnings per share have fallen at approximately 10% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tokyo Individualized Educational Institute has seen its dividend decline 14% per annum on average over the past five years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Is Tokyo Individualized Educational Institute an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, it's hard to get excited about Tokyo Individualized Educational Institute from a dividend perspective.

If you want to look further into Tokyo Individualized Educational Institute, it's worth knowing the risks this business faces. Our analysis shows 2 warning signs for Tokyo Individualized Educational Institute that we strongly recommend you have a look at before investing in the company.

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.