Three Days Left Until F-Tech Inc. (TSE:7212) Trades Ex-Dividend
Readers hoping to buy F-Tech Inc. (TSE:7212) 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase F-Tech's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥10.00 per share, on the back of last year when the company paid a total of JP¥28.00 to shareholders. Looking at the last 12 months of distributions, F-Tech has a trailing yield of approximately 2.7% on its current stock price of JP¥744.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. F-Tech paid out just 7.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 3.5% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that F-Tech'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.
See our latest analysis for F-Tech
Click here to see how much of its profit F-Tech paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. F-Tech's earnings per share have fallen at approximately 11% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the F-Tech dividends are largely the same as they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
To Sum It Up
Should investors buy F-Tech for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about F-Tech from a dividend perspective.
In light of that, while F-Tech has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 4 warning signs for F-Tech (1 is concerning!) that deserve your attention before investing in the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.