Toyo Drilube Co., Ltd. (TYO:4976) Is About To Go Ex-Dividend, And It Pays A 1.7% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Toyo Drilube Co., Ltd. (TYO:4976) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 8th of March.

Toyo Drilube's next dividend payment will be JP¥20.00 per share, on the back of last year when the company paid a total of JP¥40.00 to shareholders. Looking at the last 12 months of distributions, Toyo Drilube has a trailing yield of approximately 1.7% on its current stock price of ¥2300. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Toyo Drilube has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Toyo Drilube

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Toyo Drilube paying out a modest 28% of its earnings. 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. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Toyo Drilube'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 Drilube 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Toyo Drilube's earnings per share have fallen at approximately 11% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

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 Drilube has lifted its dividend by approximately 4.8% a year on average.

To Sum It Up

Has Toyo Drilube got what it takes to maintain its dividend payments? Toyo Drilube 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. In summary, it's hard to get excited about Toyo Drilube from a dividend perspective.

In light of that, while Toyo Drilube has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Toyo Drilube that we recommend you consider before investing in the business.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade Toyo Drilube, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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