Toho Chemical Industry Company, Limited (TSE:4409) Goes Ex-Dividend Soon

Readers hoping to buy Toho Chemical Industry Company, Limited (TSE:4409) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Thus, you can purchase Toho Chemical Industry Company's shares before the 28th of March in order to receive the dividend, which the company will pay on the 1st of July.

The company's next dividend payment will be JP¥17.00 per share, on the back of last year when the company paid a total of JP¥17.00 to shareholders. Based on the last year's worth of payments, Toho Chemical Industry Company has a trailing yield of 3.2% on the current stock price of JP¥537.00. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Toho Chemical Industry Company

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Toho Chemical Industry Company paying out a modest 41% of its earnings. A useful secondary check can be to evaluate whether Toho Chemical Industry Company generated enough free cash flow to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Toho Chemical Industry Company paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Toho Chemical Industry Company's earnings are down 4.6% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Toho Chemical Industry Company has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Is Toho Chemical Industry Company worth buying for its dividend? Toho Chemical Industry Company 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. Overall, it's hard to get excited about Toho Chemical Industry Company from a dividend perspective.

While it's tempting to invest in Toho Chemical Industry Company for the dividends alone, you should always be mindful of the risks involved. Be aware that Toho Chemical Industry Company is showing 3 warning signs in our investment analysis, and 2 of those make us uncomfortable...

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