Medius Holdings Co., Ltd. (TSE:3154) Pays A JP¥21.00 Dividend In Just Three Days

It looks like Medius Holdings Co., Ltd. (TSE:3154) is about to go ex-dividend in the next 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Medius Holdings' shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be JP¥21.00 per share. Last year, in total, the company distributed JP¥14.00 to shareholders. Based on the last year's worth of payments, Medius Holdings has a trailing yield of 1.4% on the current stock price of JP¥987.00. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Medius Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Medius Holdings is paying out an acceptable 57% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 22% of its free cash flow last year.

It's positive to see that Medius Holdings'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 Medius Holdings 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. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Medius Holdings's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Medius Holdings dividends are largely the same as they were 10 years ago.

To Sum It Up

Should investors buy Medius Holdings for the upcoming dividend? It's unfortunate that earnings per share have not grown, and we'd note that Medius Holdings is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. To summarise, Medius Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Medius Holdings is facing. Every company has risks, and we've spotted 1 warning sign for Medius Holdings you should know about.

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.

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