Tokai Tokyo Financial Holdings, Inc. (TSE:8616) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Tokai Tokyo Financial Holdings, Inc. (TSE:8616) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Tokai Tokyo Financial Holdings' shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 25th of November.

The company's upcoming dividend is JP¥12.00 a share, following on from the last 12 months, when the company distributed a total of JP¥32.00 per share to shareholders. Looking at the last 12 months of distributions, Tokai Tokyo Financial Holdings has a trailing yield of approximately 6.4% on its current stock price of JP¥502.00. 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.

View our latest analysis for Tokai Tokyo Financial Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Tokai Tokyo Financial Holdings paid out 61% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Tokai Tokyo Financial Holdings's earnings have been skyrocketing, up 61% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tokai Tokyo Financial Holdings has seen its dividend decline 1.2% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Should investors buy Tokai Tokyo Financial Holdings for the upcoming dividend? Earnings per share are growing nicely, and Tokai Tokyo Financial Holdings is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Tokai Tokyo Financial Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Tokai Tokyo Financial Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Tokai Tokyo Financial Holdings you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.