Only Three Days Left To Cash In On Mitsuchi's (TSE:3439) Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Mitsuchi Corporation (TSE:3439) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Mitsuchi's shares before the 27th of December in order to receive the dividend, which the company will pay on the 10th of March.

The company's upcoming dividend is JP¥10.00 a share, following on from the last 12 months, when the company distributed a total of JP¥20.00 per share to shareholders. Based on the last year's worth of payments, Mitsuchi stock has a trailing yield of around 3.2% on the current share price of JP¥619.00. If you buy this business for its dividend, you should have an idea of whether Mitsuchi's dividend is reliable and sustainable. So we need to investigate whether Mitsuchi can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Mitsuchi

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. Mitsuchi has a low and conservative payout ratio of just 11% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 4.1% of its free cash flow last year.

It's positive to see that Mitsuchi'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.

Click here to see how much of its profit Mitsuchi 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Mitsuchi's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Mitsuchi has lifted its dividend by approximately 2.9% a year on average.

To Sum It Up

Should investors buy Mitsuchi for the upcoming dividend? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. In summary, it's hard to get excited about Mitsuchi from a dividend perspective.

So while Mitsuchi looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Mitsuchi 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.