EN
Should You Buy TORQ Inc. (TSE:8077) For Its Upcoming Dividend?
Readers hoping to buy TORQ Inc. (TSE:8077) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. This means that investors who purchase TORQ's shares on or after the 29th of October will not receive the dividend, which will be paid on the 30th of January.
The company's upcoming dividend is JP¥3.00 a share, following on from the last 12 months, when the company distributed a total of JP¥6.00 per share to shareholders. Based on the last year's worth of payments, TORQ has a trailing yield of 2.9% on the current stock price of JP¥210.00. 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 TORQ has been able to grow its dividends, or if the dividend might be cut.
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. TORQ is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether TORQ generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 8.7% of its cash flow last year.
It's positive to see that TORQ'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 TORQ
Click here to see how much of its profit TORQ paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see TORQ's earnings have been skyrocketing, up 22% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, TORQ looks like a promising growth company.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TORQ's dividend payments are broadly unchanged compared to where they were 10 years ago.
To Sum It Up
Has TORQ got what it takes to maintain its dividend payments? We love that TORQ is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. TORQ looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for TORQ (of which 1 shouldn't be ignored!) you should know about.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.