Be Sure To Check Out Tonlin Department Store Co.,Ltd. (TWSE:2910) Before It Goes Ex-Dividend

Tonlin Department Store Co.,Ltd. (TWSE:2910) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be two business days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Tonlin Department StoreLtd's shares before the 31st of March in order to be eligible for the dividend, which will be paid on the 25th of April.

The company's next dividend payment will be NT$0.95 per share, on the back of last year when the company paid a total of NT$0.34 to shareholders. Calculating the last year's worth of payments shows that Tonlin Department StoreLtd has a trailing yield of 1.4% on the current share price of NT$24.60. 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 check whether the dividend payments are covered, and if earnings are growing.

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. Tonlin Department StoreLtd paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether Tonlin Department StoreLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 16% of its free cash flow last year.

It's positive to see that Tonlin Department StoreLtd'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.

Check out our latest analysis for Tonlin Department StoreLtd

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Tonlin Department StoreLtd's earnings per share have risen 18% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tonlin Department StoreLtd's dividend payments per share have declined at 7.0% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Is Tonlin Department StoreLtd an attractive dividend stock, or better left on the shelf? It's great that Tonlin Department StoreLtd 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. Tonlin Department StoreLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Tonlin Department StoreLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Tonlin Department StoreLtd is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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.