We wouldn’t buy Tokyo Individualized Educational Institute, Inc. (TSE:4745) too quickly before it goes ex-dividend

It looks like Tokyo Individualized Educational Institute, Inc. (TSE:4745) will trade ex-dividend for the next four days. The ex-dividend date is one business day before the record date, which is the date on which shareholders must be on the company’s books to be eligible for a dividend payment. The ex-dividend date is important because any transaction in a share must have been completed before the record date to be eligible for a dividend. So if you buy Tokyo Individualized Educational Institute shares on or after August 29, you will not be entitled to the dividend when it is paid on November 15.

The company’s next dividend payment will be JP¥6.00 per share. Over the last 12 months, the company paid a total of JP¥12.00 per share. Last year’s total dividend payments show that Tokyo Individualized Educational Institute has a yield of 2.9% on the current share price of JP¥410.00. If you buy this company for its dividend, you should have an idea of ​​whether Tokyo Individualized Educational Institute’s dividend is reliable and sustainable. Therefore, readers should always check whether Tokyo Individualized Educational Institute has been able to grow its dividend, or if the dividend could be cut.

Check out our latest analysis for Tokyo Individualized Educational Institute

If a company pays out more in dividends than it earns, the dividend may become unsustainable – far from an ideal situation. The dividend payout ratio is 79% of profits, which means the company is paying out the majority of its earnings. The relatively limited profit reinvestment could slow future earnings growth. We would be concerned if earnings started to decline. However, sometimes even highly profitable companies do not generate enough money to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Last year, the company paid out 55% of its free cash flow as dividends, which is within the usual range for most companies.

It’s positive to see that Tokyo Individualized Educational Institute’s dividend is covered by both profits and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio usually means a greater margin of safety before the dividend gets cut.

Click here to see the company’s payout ratio as well as analyst estimates of its future dividends.

Have earnings and dividends increased?

Companies with declining earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we are concerned about Tokyo Individualized Educational Institute’s 10% annual earnings decline over the past five years. Ultimately, when earnings per share fall, the size of the pie from which dividends can be paid shrinks.

Many investors judge a company’s dividend performance by how dividend payments have changed over time. Tokyo Individualized Educational Institute’s dividend payments per share have declined by an average of 18% per year over the past four years, which isn’t exactly inspiring. While it’s not great that earnings and dividends per share have declined over the past few years, we’re encouraged that management has cut the dividend rather than overextending the company in a risky attempt to maintain returns for shareholders.

Last Takeaway

Should investors buy or avoid Tokyo Individualized Educational Institute from a dividend perspective? It’s never good when earnings per share are falling, but at least dividend payout ratios seem reasonable. However, we recognize that the dividend could be at risk if earnings continue to fall. Given the current performance from a dividend perspective, we would be inclined to avoid Tokyo Individualized Educational Institute.

However, if you are not put off by Tokyo Individualized Educational Institute’s poor dividend characteristics, you should be aware of the risks associated with this business. For example, we found 2 warning signs for the Tokyo Individualized Educational Institute (1 is a bit uncomfortable) you should know.

A common mistake when investing is to buy the first interesting stock you see. Here you can find a complete list of high dividend stocks.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.