MIRARTH HOLDINGSInc (TSE:8897) Could Be A Buy For Its Upcoming Dividend

MIRARTH HOLDINGS,Inc. (TSE:8897) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, MIRARTH HOLDINGSInc investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥7.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Calculating the last year's worth of payments shows that MIRARTH HOLDINGSInc has a trailing yield of 5.8% on the current share price of JP¥513.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether MIRARTH HOLDINGSInc has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for MIRARTH HOLDINGSInc

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. Fortunately MIRARTH HOLDINGSInc's payout ratio is modest, at just 30% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that MIRARTH HOLDINGSInc'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 MIRARTH HOLDINGSInc 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see MIRARTH HOLDINGSInc earnings per share are up 2.1% per annum 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, MIRARTH HOLDINGSInc has lifted its dividend by approximately 21% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has MIRARTH HOLDINGSInc got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and MIRARTH HOLDINGSInc 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. It might be nice to see earnings growing faster, but MIRARTH HOLDINGSInc is being conservative with its dividend payouts and could still perform reasonably over the long run. MIRARTH HOLDINGSInc looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while MIRARTH HOLDINGSInc has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 4 warning signs with MIRARTH HOLDINGSInc (at least 2 which are significant), and understanding them should be part of your investment process.

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.