There's A Lot To Like About Paris Miki Holdings' (TSE:7455) Upcoming JP¥4.00 Dividend

Readers hoping to buy Paris Miki Holdings Inc. (TSE:7455) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Paris Miki Holdings' shares on or after the 27th of September will not receive the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be JP¥4.00 per share, and in the last 12 months, the company paid a total of JP¥8.00 per share. Based on the last year's worth of payments, Paris Miki Holdings stock has a trailing yield of around 2.2% on the current share price of JP¥359.00. If you buy this business for its dividend, you should have an idea of whether Paris Miki Holdings's dividend is reliable and sustainable. So we need to investigate whether Paris Miki Holdings can afford its dividend, and if the dividend could grow.

View our latest analysis for Paris Miki Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Paris Miki Holdings is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Fortunately, it paid out only 29% 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.

Click here to see how much of its profit Paris Miki Holdings 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Paris Miki Holdings's earnings have been skyrocketing, up 62% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Paris Miki Holdings has seen its dividend decline 7.8% per annum on average over the past 10 years, which is not great to see. Paris Miki Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Paris Miki Holdings worth buying for its dividend? It's great that Paris Miki Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Paris Miki Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Paris Miki Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Paris Miki Holdings you should be aware of.

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.