The board of Miraial Co., Ltd. (TSE:4238) has announced that it will pay a dividend on the 28th of April, with investors receiving ¥20.00 per share. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.
See our latest analysis for Miraial
Miraial's Projected Earnings Seem Likely To Cover Future Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Miraial was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Unless the company can turn things around, EPS could fall by 4.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥40.00. This works out to be a decline of approximately 4.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Miraial's earnings per share has fallen at approximately 4.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Miraial's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Miraial is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Miraial that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.
About TSE:4238
Miraial
Engages in the manufacture, marketing, and sale of semiconductor-related products in Japan.
Flawless balance sheet low.
