Marubeni (TSE:8002) Could Be A Buy For Its Upcoming Dividend

It looks like Marubeni Corporation (TSE:8002) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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. This means that investors who purchase Marubeni's shares on or after the 28th of March will not receive the dividend, which will be paid on the 3rd of June.

The company's next dividend payment will be JP¥50.00 per share. Last year, in total, the company distributed JP¥100.00 to shareholders. Based on the last year's worth of payments, Marubeni has a trailing yield of 3.9% on the current stock price of JP¥2545.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Marubeni can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Marubeni's payout ratio is modest, at just 28% of profit. 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 more than half (52%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Marubeni'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.

View our latest analysis for Marubeni

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Marubeni's earnings per share have risen 19% per annum over the last five years. Marubeni is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Marubeni has increased its dividend at approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Marubeni for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Marubeni paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Marubeni, and we would prioritise taking a closer look at it.

While it's tempting to invest in Marubeni for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Marubeni (1 is concerning) you should be aware of.

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.