Mino Ceramic (TSE:5356) Could Be A Buy For Its Upcoming Dividend

Mino Ceramic Co., Ltd. (TSE:5356) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Mino Ceramic's shares before the 28th of March in order to receive the dividend, which the company will pay on the 9th of June.

The company's next dividend payment will be JP¥16.00 per share, on the back of last year when the company paid a total of JP¥34.00 to shareholders. Last year's total dividend payments show that Mino Ceramic has a trailing yield of 4.0% on the current share price of JP¥840.00. 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 Mino Ceramic has been able to grow its dividends, or if the dividend might be cut.

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. That's why it's good to see Mino Ceramic paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Mino Ceramic generated enough free cash flow to afford its dividend. Fortunately, it paid out only 27% of its free cash flow in the past 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.

Check out our latest analysis for Mino Ceramic

Click here to see how much of its profit Mino Ceramic 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Mino Ceramic, with earnings per share up 2.4% on average over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Mino Ceramic has lifted its dividend by approximately 21% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Mino Ceramic for the upcoming dividend? Earnings per share growth has been growing somewhat, and Mino Ceramic is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Mino Ceramic is halfway there. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Mino Ceramic for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Mino Ceramic and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.