Tayca Corporation (TSE:4027) Pays A JP¥18.00 Dividend In Just Three Days

Tayca Corporation (TSE:4027) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Tayca's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 4th of December.

The company's next dividend payment will be JP¥18.00 per share, and in the last 12 months, the company paid a total of JP¥38.00 per share. Calculating the last year's worth of payments shows that Tayca has a trailing yield of 2.3% on the current share price of JP¥1655.00. If you buy this business for its dividend, you should have an idea of whether Tayca's dividend is reliable and sustainable. So we need to investigate whether Tayca can afford its dividend, and if the dividend could grow.

View our latest analysis for Tayca

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 Tayca paying out a modest 40% of its earnings. 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 61% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Tayca'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 Tayca 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Tayca's earnings per share have fallen at approximately 11% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Tayca has lifted its dividend by approximately 9.0% a year on average.

Final Takeaway

Is Tayca an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Tayca paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, it's hard to get excited about Tayca from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Tayca, you should know about the other risks facing this business. Be aware that Tayca is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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.