Today we take a closer look at Truck-One Co., Ltd. (FKSE: 3047) from an investor perspective. Owning a strong business and reinvesting the dividend is widely seen as an attractive way to grow your wealth. Yet investors sometimes buy a stock for its dividend and lose money because the stock price falls by more than they earned in dividend payments.
While Truck-One’s 2.1% dividend is not the highest, we think its long payment history is quite interesting. When buying stocks for their dividends, always review the checks below to see if the dividends look sustainable.
Dividends are usually paid out of the company’s earnings. If a company pays more than it earns, the dividends may become unsustainable – hardly an ideal situation. Comparing dividend payments with a company’s net profit after tax is a simple way to check if a dividend is sustainable. In the past year, Truck-One paid 52% of its profits as dividends. A payout ratio above 50% generally means that a company reaches maturity, although it is still possible to reinvest in the company or increase dividends over time.
Consider getting our latest analysis of Truck-One’s financial position here.
From an income investor perspective that wants to earn dividends for many years, it does not make much sense to buy a stock if its dividends are regularly cut or are not reliable. For the purposes of this article, we only examine the last decade of Truck-One’s dividend payments. The yield has historically been cut on at least one occasion. Its most recent annual dividend was JP ¥ 5.0 per share. Share, which actually corresponds to the first payment 10 years ago.
It is good to see some yield growth, but the yield has been cut at least once and the size of the cut would still eliminate most of the growth. We are not so excited about this.
Dividend growth potential
With a relatively unstable dividend, it is even more important to see whether earnings per share. Stock (EPS) is growing. Why take the risk of a dividend being cut unless there is a good chance of greater dividends in the future? While there may be fluctuations in the past, Truck-One’s earnings per. Stocks have largely not grown from where they were five years ago. In the long run, stable earnings per Share a risk as the value of the dividend can be reduced by inflation. Growth of 1.1% is relatively anemic growth, which we are surprised at. When a business is not growing, it often makes more sense to pay higher dividends to shareholders instead of keeping the cash without any way to spend it.
When we look at a dividend stock, we have to judge whether the dividend will grow if the company is able to sustain it under a wide range of economic conditions, and whether the dividend is sustainable. First, we believe that Truck-One has an acceptable payout ratio. Unfortunately, the company has not been able to generate earnings growth and has cut dividends at least once before. In summary, we are not enthusiastic about Truck-One as a dividend. It’s not that we think it’s a bad business; it simply falls under our criteria in some key areas.
Market movements testify to how highly valued a consistent dividend policy is compared to one that is more unpredictable. Meanwhile, they are not the only factors that our readers should know when valuing a business, despite the importance of dividend payments. For that purpose, Truck-One has it 4 warning signs (and 2 that make us uncomfortable) we think you need to know about.
We have also put together one list of global stocks with a market value of over $ 1 billion. and gives more than 3%.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any shares and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis driven by basic data. Please note that our analysis may not include the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in the mentioned stocks.
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