Three Days Left Until Taiyo Holdings Co., Ltd. (TSE:4626) Trades Ex-Dividend

It looks like Taiyo Holdings Co., Ltd. (TSE:4626) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days 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 at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Taiyo Holdings investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥145.00 per share. Last year, in total, the company distributed JP¥290 to shareholders. Based on the last year's worth of payments, Taiyo Holdings has a trailing yield of 3.6% on the current stock price of JP¥8140.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Taiyo Holdings can afford its dividend, and if the dividend could grow.

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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. Taiyo Holdings paid out 98% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's good to see that while Taiyo Holdings's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Check out our latest analysis for Taiyo Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Taiyo Holdings has grown its earnings rapidly, up 24% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Taiyo Holdings has delivered 20% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Taiyo Holdings got what it takes to maintain its dividend payments? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Taiyo Holdings's paying out such a high percentage of its profit. Overall, it's hard to get excited about Taiyo Holdings from a dividend perspective.

On that note, you'll want to research what risks Taiyo Holdings is facing. For example, we've found 2 warning signs for Taiyo Holdings (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

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.