There's A Lot To Like About Masaru's (TSE:1795) Upcoming JP¥110.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Masaru Corporation (TSE:1795) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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 Masaru's shares before the 27th of September in order to receive the dividend, which the company will pay on the 27th of December.

The company's next dividend payment will be JP¥110.00 per share. Last year, in total, the company distributed JP¥110 to shareholders. Calculating the last year's worth of payments shows that Masaru has a trailing yield of 2.7% on the current share price of JP¥4050.00. If you buy this business for its dividend, you should have an idea of whether Masaru's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Masaru

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. Fortunately Masaru's payout ratio is modest, at just 29% of profit. 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. It distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Masaru'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 Masaru paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 encouraged by the steady growth at Masaru, with earnings per share up 9.9% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Masaru has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Masaru worth buying for its dividend? Earnings per share growth has been growing somewhat, and Masaru is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Masaru is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Masaru, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Masaru is facing. Be aware that Masaru is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.