We Wouldn't Be Too Quick To Buy Toyo Kanetsu K.K. (TSE:6369) Before It Goes Ex-Dividend

Toyo Kanetsu K.K. (TSE:6369) stock is about to trade ex-dividend in three 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 Toyo Kanetsu K.K's shares before the 29th of September in order to receive the dividend, which the company will pay on the 11th of December.

The company's next dividend payment will be JP¥50.00 per share, and in the last 12 months, the company paid a total of JP¥105 per share. Last year's total dividend payments show that Toyo Kanetsu K.K has a trailing yield of 4.3% on the current share price of JP¥2425.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, Toyo Kanetsu K.K paid out 99% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's good to see that while Toyo Kanetsu K.K's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

See our latest analysis for Toyo Kanetsu K.K

Click here to see how much of its profit Toyo Kanetsu K.K paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Toyo Kanetsu K.K's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Toyo Kanetsu K.K has delivered 15% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Toyo Kanetsu K.K for the upcoming dividend? The company has not generated any growth in earnings per share over the 10-year timeframe we measured. Plus, Toyo Kanetsu K.K's paying out a high percentage of its earnings and more than half its cash flow. It's not that we think Toyo Kanetsu K.K is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Toyo Kanetsu K.K as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 2 warning signs for Toyo Kanetsu K.K that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.