Mr Max Holdings Ltd. (TSE:8203) Passed Our Checks, And It's About To Pay A JP¥20.00 Dividend

Mr Max Holdings Ltd. (TSE:8203) is about to trade ex-dividend in the next three 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. 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. Therefore, if you purchase Mr Max Holdings' shares on or after the 27th of February, you won't be eligible to receive the dividend, when it is paid on the 26th of May.

The company's next dividend payment will be JP¥20.00 per share, and in the last 12 months, the company paid a total of JP¥20.00 per share. Based on the last year's worth of payments, Mr Max Holdings stock has a trailing yield of around 2.9% on the current share price of JP¥682.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Mr Max Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Mr Max Holdings

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. Mr Max Holdings has a low and conservative payout ratio of just 22% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's positive to see that Mr Max Holdings'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 Mr Max 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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Mr Max Holdings earnings per share are up 4.2% per annum over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mr Max Holdings has delivered an average of 4.6% per year annual increase in its dividend, based on the past eight years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Mr Max Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Mr Max Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Mr Max Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Mr Max Holdings, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Mr Max Holdings is facing. Case in point: We've spotted 2 warning signs for Mr Max Holdings you should be aware of.

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.

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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.