Toyo Seikan Group Holdings, Ltd. (TSE:5901) Will Pay A JP¥46.00 Dividend In Three Days

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 Toyo Seikan Group Holdings, Ltd. (TSE:5901) is about to go ex-dividend in just three days. The ex-dividend date generally occurs two days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Toyo Seikan Group Holdings' shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 24th of June.

The company's next dividend payment will be JP¥46.00 per share. Last year, in total, the company distributed JP¥92.00 to shareholders. Based on the last year's worth of payments, Toyo Seikan Group Holdings stock has a trailing yield of around 3.6% on the current share price of JP¥2547.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Toyo Seikan Group Holdings is paying out an acceptable 64% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Toyo Seikan Group Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Toyo Seikan Group Holdings'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.

View our latest analysis for Toyo Seikan Group Holdings

Click here to see how much of its profit Toyo Seikan Group Holdings paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Toyo Seikan Group Holdings, with earnings per share up 7.7% on average over the last five years. Decent historical earnings per share growth suggests Toyo Seikan Group Holdings has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Toyo Seikan Group Holdings has delivered an average of 21% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Toyo Seikan Group Holdings got what it takes to maintain its dividend payments? While earnings per share growth has been modest, Toyo Seikan Group Holdings's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. To summarise, Toyo Seikan Group Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Toyo Seikan Group Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Toyo Seikan Group Holdings you should be aware of.

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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.