Be Sure To Check Out Tohoku Electric Power Company, Incorporated (TSE:9506) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tohoku Electric Power Company, Incorporated (TSE:9506) is about to go ex-dividend in just four 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. 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. Meaning, you will need to purchase Tohoku Electric Power Company's shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be JP¥20.00 per share, on the back of last year when the company paid a total of JP¥40.00 to shareholders. Last year's total dividend payments show that Tohoku Electric Power Company has a trailing yield of 3.6% on the current share price of JP¥1116.00. 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 Tohoku Electric Power Company can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tohoku Electric Power Company is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Tohoku Electric Power Company'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 Tohoku Electric Power Company

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Tohoku Electric Power Company's earnings have been skyrocketing, up 20% per annum for 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. In the last 10 years, Tohoku Electric Power Company has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Tohoku Electric Power Company an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Tohoku Electric Power Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Tohoku Electric Power Company is facing. To that end, you should learn about the 3 warning signs we've spotted with Tohoku Electric Power Company (including 2 which don't sit too well with us).

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