Is It Worth Considering Tecmira Holdings Inc. (TSE:3627) For Its Upcoming Dividend?

It looks like Tecmira Holdings Inc. (TSE:3627) is about to go ex-dividend in the next 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 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 Tecmira Holdings' shares on or after the 27th of February will not receive the dividend, which will be paid on the 30th of May.

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. Last year's total dividend payments show that Tecmira Holdings has a trailing yield of 1.5% on the current share price of JP¥329.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Tecmira Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Tecmira Holdings

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. Tecmira Holdings paid out more than half (70%) of its earnings last year, which is a regular payout ratio for most companies. 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. The good news is it paid out just 5.7% of its free cash flow in the last year.

It's positive to see that Tecmira 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.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tecmira Holdings's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 31% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tecmira Holdings has delivered 1.1% dividend growth per year on average over the past 10 years.

Final Takeaway

Has Tecmira Holdings got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, Tecmira Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Tecmira Holdings, you should know about the other risks facing this business. For instance, we've identified 4 warning signs for Tecmira Holdings (1 shouldn't be ignored) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.