There's A Lot To Like About Macnica Holdings' (TSE:3132) Upcoming JP¥35.00 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Macnica Holdings, Inc. (TSE:3132) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Macnica Holdings' shares before the 28th of March to receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be JP¥35.00 per share, on the back of last year when the company paid a total of JP¥70.00 to shareholders. Last year's total dividend payments show that Macnica Holdings has a trailing yield of 3.6% on the current share price of JP¥1937.50. 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 check whether the dividend payments are covered, and if earnings are growing.

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. That's why it's good to see Macnica Holdings paying out a modest 38% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

See our latest analysis for Macnica Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 33% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Macnica Holdings has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Macnica Holdings an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. 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.

If you're in the market for strong dividend payers, we recommend checking 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.