Income Investors Should Know That Mitsubishi Chemical Group Corporation (TSE:4188) Goes 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 Mitsubishi Chemical Group Corporation (TSE:4188) is about to go ex-dividend in just 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Mitsubishi Chemical Group's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥32.00 to shareholders. Calculating the last year's worth of payments shows that Mitsubishi Chemical Group has a trailing yield of 3.4% on the current share price of JP¥932.10. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Mitsubishi Chemical Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mitsubishi Chemical Group paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Mitsubishi Chemical Group generated enough free cash flow to afford its dividend. The good news is it paid out just 24% of its free cash flow in the last year.

It's positive to see that Mitsubishi Chemical Group'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Mitsubishi Chemical Group's earnings per share have fallen at approximately 7.2% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Mitsubishi Chemical Group has lifted its dividend by approximately 10% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Mitsubishi Chemical Group? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Mitsubishi Chemical Group and you should be aware of them before buying any shares.

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.