Why It Might Not Make Sense To Buy Green Monster Inc. (TSE:157A) For Its Upcoming Dividend

It looks like Green Monster Inc. (TSE:157A) is about to go ex-dividend in the next 3 days. The ex-dividend date is commonly two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Green Monster's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 5th of September.

The company's next dividend payment will be JP¥10.00 per share, and in the last 12 months, the company paid a total of JP¥10.00 per share. Last year's total dividend payments show that Green Monster has a trailing yield of 1.9% on the current share price of JP¥534.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Green Monster has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

See our latest analysis for Green Monster

Click here to see how much of its profit Green Monster paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Green Monster's earnings per share plummeted 25% over the past year,which is rarely good news for the dividend.

Green Monster also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Green Monster has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Green Monster? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. Green Monster doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Green Monster don't faze you, it's worth being mindful of the risks involved with this business. To that end, you should learn about the 5 warning signs we've spotted with Green Monster (including 1 which is significant).

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.