Is It Worth Considering The Torigoe Co., Ltd. (TSE:2009) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Torigoe Co., Ltd. (TSE:2009) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Torigoe's shares before the 27th of December in order to receive the dividend, which the company will pay on the 31st of March.

The company's next dividend payment will be JP¥20.00 per share. Last year, in total, the company distributed JP¥20.00 to shareholders. Looking at the last 12 months of distributions, Torigoe has a trailing yield of approximately 2.5% on its current stock price of JP¥800.00. If you buy this business for its dividend, you should have an idea of whether Torigoe's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Torigoe

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. That's why it's good to see Torigoe paying out a modest 42% of its earnings. 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. The good news is it paid out just 23% of its free cash flow in the last year.

It's positive to see that Torigoe'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 Torigoe paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Torigoe's earnings per share have been shrinking at 3.6% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Torigoe has increased its dividend at approximately 5.2% a year on average.

To Sum It Up

Is Torigoe an attractive dividend stock, or better left on the shelf? Torigoe has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Torigoe looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Torigoe for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Torigoe and understanding them should be part of your investment process.

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.