Is It Worth Considering Tokyo Printing Ink Mfg. Co., Ltd. (TSE:4635) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tokyo Printing Ink Mfg. Co., Ltd. (TSE:4635) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Tokyo Printing Ink Mfg investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is JP¥60.00 a share, following on from the last 12 months, when the company distributed a total of JP¥120 per share to shareholders. Looking at the last 12 months of distributions, Tokyo Printing Ink Mfg has a trailing yield of approximately 3.9% on its current stock price of JP¥3050.00. If you buy this business for its dividend, you should have an idea of whether Tokyo Printing Ink Mfg's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Tokyo Printing Ink Mfg

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tokyo Printing Ink Mfg paid out a comfortable 28% of its profit last year. 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 77% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Tokyo Printing Ink Mfg'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 Tokyo Printing Ink Mfg 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. With that in mind, we're discomforted by Tokyo Printing Ink Mfg's 5.9% per annum decline in earnings in the past 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. Tokyo Printing Ink Mfg has delivered 7.2% dividend growth per year on average over the past 10 years.

Final Takeaway

Is Tokyo Printing Ink Mfg an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Tokyo Printing Ink Mfg paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Tokyo Printing Ink Mfg from a dividend perspective.

If you're not too concerned about Tokyo Printing Ink Mfg's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 2 warning signs for Tokyo Printing Ink Mfg that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.