Why You Might Be Interested In Tohokushinsha Film Corporation (TSE:2329) For Its Upcoming Dividend

Tohokushinsha Film Corporation (TSE:2329) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Tohokushinsha Film's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of January.

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. Last year's total dividend payments show that Tohokushinsha Film has a trailing yield of 3.6% on the current share price of JP¥719.00. If you buy this business for its dividend, you should have an idea of whether Tohokushinsha Film'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 Tohokushinsha Film

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Tohokushinsha Film has a low and conservative payout ratio of just 17% of its income after tax. A useful secondary check can be to evaluate whether Tohokushinsha Film generated enough free cash flow to afford its dividend. Luckily it paid out just 15% of its free cash flow last year.

It's positive to see that Tohokushinsha Film'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 Tohokushinsha Film paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Tohokushinsha Film has grown its earnings rapidly, up 32% a year for the past five years. Tohokushinsha Film looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tohokushinsha Film has delivered 19% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Tohokushinsha Film got what it takes to maintain its dividend payments? Tohokushinsha Film has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Tohokushinsha Film, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Tohokushinsha Film is facing. Our analysis shows 2 warning signs for Tohokushinsha Film and you should be aware of them before buying any 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.