Mr Max Holdings (TSE:8203) Will Pay A Larger Dividend Than Last Year At ¥27.00

Mr Max Holdings Ltd. (TSE:8203) will increase its dividend from last year's comparable payment on the 25th of May to ¥27.00. This will take the annual payment to 3.4% of the stock price, which is above what most companies in the industry pay.

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Mr Max Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Mr Max Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 1.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Mr Max Holdings

Mr Max Holdings' Dividend Has Lacked Consistency

It's comforting to see that Mr Max Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥27.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Mr Max Holdings might have put its house in order since then, but we remain cautious.

Mr Max Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Mr Max Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Mr Max Holdings has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Mr Max Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mr Max Holdings' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Mr Max Holdings (2 are significant!) that you should be aware of before investing. Is Mr Max Holdings not quite the opportunity you were looking for? Why not check out 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.