Maruhachi Warehouse Company, Limited (TSE:9313) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 Maruhachi Warehouse Company, Limited (TSE:9313) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Maruhachi Warehouse Company's shares before the 28th of November in order to be eligible for the dividend, which will be paid on the 28th of February.

The company's next dividend payment will be JP¥20.00 per share. Last year, in total, the company distributed JP¥20.00 to shareholders. Based on the last year's worth of payments, Maruhachi Warehouse Company has a trailing yield of 2.3% on the current stock price of JP¥858.00. If you buy this business for its dividend, you should have an idea of whether Maruhachi Warehouse Company's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Maruhachi Warehouse Company

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. Maruhachi Warehouse Company is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Maruhachi Warehouse Company generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Maruhachi Warehouse Company paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Maruhachi Warehouse Company's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Maruhachi Warehouse Company is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Maruhachi Warehouse Company has lifted its dividend by approximately 3.6% a year on average.

To Sum It Up

Has Maruhachi Warehouse Company got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Maruhachi Warehouse Company is halfway there. Maruhachi Warehouse Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Maruhachi Warehouse Company for the dividends alone, you should always be mindful of the risks involved. For example, Maruhachi Warehouse Company has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.