Read This Before Considering Tohokushinsha Film Corporation (TSE:2329) For Its Upcoming JP¥6.67 Dividend

Tohokushinsha Film Corporation (TSE:2329) is about to trade ex-dividend in the next 3 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. 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. In other words, investors can purchase Tohokushinsha Film's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 30th of June.

The company's next dividend payment will be JP¥6.67 per share. Last year, in total, the company distributed JP¥26.00 to shareholders. Based on the last year's worth of payments, Tohokushinsha Film has a trailing yield of 4.3% on the current stock price of JP¥606.00. If you buy this business for its dividend, you should have an idea of whether Tohokushinsha Film's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Tohokushinsha Film distributed an unsustainably high 153% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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. Luckily it paid out just 24% of its free cash flow last year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Tohokushinsha Film fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

See our latest analysis for Tohokushinsha Film

Click here to see how much of its profit Tohokushinsha Film paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Tohokushinsha Film's earnings have been skyrocketing, up 27% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Tohokushinsha Film has lifted its dividend by approximately 19% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Tohokushinsha Film an attractive dividend stock, or better left on the shelf? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Tohokushinsha Film is paying out so much of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Tohokushinsha Film looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Tohokushinsha Film (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.