Just Two Days Till Mitsubishi Steel Mfg. Co., Ltd. (TSE:5632) Will Be Trading Ex-Dividend

Mitsubishi Steel Mfg. Co., Ltd. (TSE:5632) stock is about to trade ex-dividend in 2 days. The ex-dividend date is usually set to be one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Mitsubishi Steel Mfg's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 9th of December.

The company's next dividend payment will be JP¥30.00 per share, and in the last 12 months, the company paid a total of JP¥60.00 per share. Based on the last year's worth of payments, Mitsubishi Steel Mfg stock has a trailing yield of around 4.4% on the current share price of JP¥1364.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Mitsubishi Steel Mfg

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Mitsubishi Steel Mfg lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Mitsubishi Steel Mfg 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 fall far enough, the company could be forced to cut its dividend. Mitsubishi Steel Mfg was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

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 Steel Mfg has lifted its dividend by approximately 1.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Remember, you can always get a snapshot of Mitsubishi Steel Mfg's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Mitsubishi Steel Mfg? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. In summary, it's hard to get excited about Mitsubishi Steel Mfg from a dividend perspective.

So while Mitsubishi Steel Mfg looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 2 warning signs with Mitsubishi Steel Mfg (at least 1 which can't be ignored), and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.