Matsumoto Yushi-Seiyaku Co.,Ltd. (TSE:4365) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Matsumoto Yushi-Seiyaku Co.,Ltd. (TSE:4365) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Matsumoto Yushi-SeiyakuLtd's shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 26th of June.

The company's next dividend payment will be JP¥400.00 per share. Last year, in total, the company distributed JP¥400 to shareholders. Based on the last year's worth of payments, Matsumoto Yushi-SeiyakuLtd has a trailing yield of 2.2% on the current stock price of JP¥17870.00. 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 investigate whether Matsumoto Yushi-SeiyakuLtd can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Matsumoto Yushi-SeiyakuLtd has a low and conservative payout ratio of just 15% of its income after tax. A useful secondary check can be to evaluate whether Matsumoto Yushi-SeiyakuLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 14% of its free cash flow last year.

It's positive to see that Matsumoto Yushi-SeiyakuLtd'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.

Check out our latest analysis for Matsumoto Yushi-SeiyakuLtd

Click here to see how much of its profit Matsumoto Yushi-SeiyakuLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Matsumoto Yushi-SeiyakuLtd's earnings per share have risen 14% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Matsumoto Yushi-SeiyakuLtd has increased its dividend at approximately 4.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Matsumoto Yushi-SeiyakuLtd is keeping back more of its profits to grow the business.

The Bottom Line

Should investors buy Matsumoto Yushi-SeiyakuLtd for the upcoming dividend? Matsumoto Yushi-SeiyakuLtd has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Want to learn more about Matsumoto Yushi-SeiyakuLtd? Here's a visualisation of its historical rate of revenue and earnings growth.

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.