Tokyo Ohka Kogyo Co., Ltd. (TSE:4186) Is About To Go Ex-Dividend, And It Pays A 1.2% Yield

It looks like Tokyo Ohka Kogyo Co., Ltd. (TSE:4186) is about to go ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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 Tokyo Ohka Kogyo's shares before the 29th of December to receive the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be JP¥35.00 per share, and in the last 12 months, the company paid a total of JP¥70.00 per share. Calculating the last year's worth of payments shows that Tokyo Ohka Kogyo has a trailing yield of 1.2% on the current share price of JP¥5860.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Tokyo Ohka Kogyo has been able to grow its dividends, or if the dividend might be cut.

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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. Fortunately Tokyo Ohka Kogyo's payout ratio is modest, at just 28% of profit. 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. Over the last year, it paid out dividends equivalent to 380% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Tokyo Ohka Kogyo is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Tokyo Ohka Kogyo paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Tokyo Ohka Kogyo's ability to maintain its dividend.

See our latest analysis for Tokyo Ohka Kogyo

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Tokyo Ohka Kogyo has grown its earnings rapidly, up 41% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Tokyo Ohka Kogyo has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Tokyo Ohka Kogyo worth buying for its dividend? We like that Tokyo Ohka Kogyo has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So while Tokyo Ohka Kogyo looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Tokyo Ohka Kogyo that we recommend you consider before investing in the business.

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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.