Is It Smart To Buy Macnica Holdings, Inc. (TSE:3132) Before It Goes Ex-Dividend?

Macnica Holdings, Inc. (TSE:3132) stock is about to trade ex-dividend in 3 days. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Macnica Holdings' shares on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥105.00 per share, on the back of last year when the company paid a total of JP¥70.00 to shareholders. Based on the last year's worth of payments, Macnica Holdings has a trailing yield of 1.2% on the current stock price of JP¥5910.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Macnica Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Macnica Holdings paid out a comfortable 28% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 36% of its free cash flow in the past year.

It's positive to see that Macnica 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. That's why it's comforting to see Macnica Holdings's earnings have been skyrocketing, up 38% 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last nine years, Macnica Holdings has lifted its dividend by approximately 1.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Macnica Holdings is keeping back more of its profits to grow the business.

The Bottom Line

Is Macnica Holdings worth buying for its dividend? Macnica Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. Macnica Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Macnica Holdings is facing. Case in point: We've spotted 1 warning sign for Macnica 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.