Interested In Tensho Electric Industries' (TSE:6776) Upcoming JP¥5.00 Dividend? You Have Three Days Left

Readers hoping to buy Tensho Electric Industries Co., Ltd. (TSE:6776) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Tensho Electric Industries investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 30th of June.

The company's next dividend payment will be JP¥5.00 per share, and in the last 12 months, the company paid a total of JP¥5.00 per share. Based on the last year's worth of payments, Tensho Electric Industries stock has a trailing yield of around 1.9% on the current share price of JP¥268.00. If you buy this business for its dividend, you should have an idea of whether Tensho Electric Industries's dividend is reliable and sustainable. So we need to investigate whether Tensho Electric Industries can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tensho Electric Industries paid out just 14% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Tensho Electric Industries generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Tensho Electric Industries'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.

See our latest analysis for Tensho Electric Industries

Click here to see how much of its profit Tensho Electric Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Tensho Electric Industries's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tensho Electric Industries has delivered 6.6% dividend growth per year on average over the past eight years.

The Bottom Line

Has Tensho Electric Industries got what it takes to maintain its dividend payments? While it's not great to see that earnings per share are effectively flat over the eight-year period we checked, at least the payout ratios are low and conservative. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Tensho Electric Industries's dividend merits.

In light of that, while Tensho Electric Industries has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Tensho Electric Industries and understanding them should be part of your investment process.

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.