Tabio Corporation (TSE:2668) Goes Ex-Dividend Soon

Tabio Corporation (TSE:2668) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day 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. 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. This means that investors who purchase Tabio's shares on or after the 27th of February will not receive the dividend, which will be paid on the 26th of May.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Looking at the last 12 months of distributions, Tabio has a trailing yield of approximately 2.4% on its current stock price of JP¥1248.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Tabio

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. Tabio paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (89%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Tabio'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. A high payout ratio of 55% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Tabio could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tabio's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

Has Tabio got what it takes to maintain its dividend payments? Earnings per share have barely grown, and although Tabio paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Tabio, you should know about the other risks facing this business. For example - Tabio has 3 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.