Toyo Sugar Refining Co., Ltd. (TSE:2107) Is About To Go Ex-Dividend, And It Pays A 2.7% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Toyo Sugar Refining Co., Ltd. (TSE:2107) is about to trade ex-dividend in the next 3 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 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. Meaning, you will need to purchase Toyo Sugar Refining's shares before the 27th of September to receive the dividend, which will be paid on the 11th of December.

The company's next dividend payment will be JP¥35.00 per share. Last year, in total, the company distributed JP¥40.00 to shareholders. Looking at the last 12 months of distributions, Toyo Sugar Refining has a trailing yield of approximately 2.7% on its current stock price of JP¥1476.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Toyo Sugar Refining can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Toyo Sugar Refining

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Toyo Sugar Refining paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Toyo Sugar Refining'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 Toyo Sugar Refining 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Toyo Sugar Refining, with earnings per share up 5.7% on average over the last five years. Decent historical earnings per share growth suggests Toyo Sugar Refining has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Toyo Sugar Refining has lifted its dividend by approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Toyo Sugar Refining for the upcoming dividend? Earnings per share have been growing at a steady rate, and Toyo Sugar Refining paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, it's hard to get excited about Toyo Sugar Refining from a dividend perspective.

On that note, you'll want to research what risks Toyo Sugar Refining is facing. Every company has risks, and we've spotted 1 warning sign for Toyo Sugar Refining you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.