Why You Might Be Interested In TDK Corporation (TSE:6762) For Its Upcoming Dividend

TDK Corporation (TSE:6762) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase TDK's shares before the 29th of September in order to receive the dividend, which the company will pay on the 3rd of December.

The company's next dividend payment will be JP¥15.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Based on the last year's worth of payments, TDK has a trailing yield of 1.4% on the current stock price of JP¥2143.00. 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! So we need to investigate whether TDK can afford its dividend, and if the dividend could grow.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see TDK paying out a modest 38% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that TDK'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.

View our latest analysis for TDK

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see TDK has grown its earnings rapidly, up 21% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, TDK has increased its dividend at 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.

To Sum It Up

Has TDK got what it takes to maintain its dividend payments? It's great that TDK is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. TDK looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while TDK has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for TDK you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.