Medical System Network Co., Ltd. (TSE:4350) Passed Our Checks, And It's About To Pay A JP¥6.00 Dividend

Readers hoping to buy Medical System Network Co., Ltd. (TSE:4350) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. In other words, investors can purchase Medical System Network's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 11th of December.

The company's next dividend payment will be JP¥6.00 per share, on the back of last year when the company paid a total of JP¥12.00 to shareholders. Looking at the last 12 months of distributions, Medical System Network has a trailing yield of approximately 2.7% on its current stock price of JP¥438.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Medical System Network has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Medical System Network

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Medical System Network paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 6.5% of its free cash flow 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 Medical System Network paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Medical System Network has grown its earnings rapidly, up 33% a year for the past five years. Medical System Network looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Medical System Network has lifted its dividend by approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Medical System Network is keeping back more of its profits to grow the business.

Final Takeaway

Is Medical System Network worth buying for its dividend? Medical System Network has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Medical System Network, and we would prioritise taking a closer look at it.

While it's tempting to invest in Medical System Network for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with Medical System Network and understanding them should be part of your investment process.

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.