Fujisan Magazine Service Co., Ltd. (TSE:3138) Goes Ex-Dividend Soon

Fujisan Magazine Service Co., Ltd. (TSE:3138) is about to trade ex-dividend in the next three 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 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. This means that investors who purchase Fujisan Magazine Service's shares on or after the 27th of December will not receive the dividend, which will be paid on the 28th of March.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥16.00 to shareholders. Looking at the last 12 months of distributions, Fujisan Magazine Service has a trailing yield of approximately 2.3% on its current stock price of JP¥686.00. 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 Fujisan Magazine Service has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Fujisan Magazine Service

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Fujisan Magazine Service paying out a modest 27% of its earnings. 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 paid out 94% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Fujisan Magazine Service paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Fujisan Magazine Service to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Fujisan Magazine Service paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Fujisan Magazine Service's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Fujisan Magazine Service dividends are largely the same as they were two years ago.

To Sum It Up

From a dividend perspective, should investors buy or avoid Fujisan Magazine Service? Earnings per share have been effectively flat over this time, and Fujisan Magazine Service's paying out less than half its profits and 94% of its cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. In summary, it's hard to get excited about Fujisan Magazine Service from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Fujisan Magazine Service, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Fujisan Magazine Service you should know about.

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.