Miraial Co., Ltd. (TSE:4238) will pay a dividend of ¥20.00 on the 10th of October. Based on this payment, the dividend yield on the company's stock will be 2.5%, which is an attractive boost to shareholder returns.
See our latest analysis for Miraial
Miraial's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Miraial's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Unless the company can turn things around, EPS could fall by 12.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, 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. Since 2014, the annual payment back then was ¥60.00, compared to the most recent full-year payment of ¥40.00. The dividend has shrunk at around 4.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 13% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Miraial's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Miraial that investors should take into consideration. Is Miraial 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.
About TSE:4238
Miraial
Engages in the manufacture, marketing, and sale of semiconductor-related products in Japan.
Flawless balance sheet slight.
