There's A Lot To Like About Mimaki Engineering's (TSE:6638) Upcoming JP¥15.00 Dividend

Mimaki Engineering Co., Ltd. (TSE:6638) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Mimaki Engineering's shares before the 28th of March to receive the dividend, which will be paid on the 24th of June.

The company's upcoming dividend is JP¥15.00 a share, following on from the last 12 months, when the company distributed a total of JP¥32.50 per share to shareholders. Last year's total dividend payments show that Mimaki Engineering has a trailing yield of 2.2% on the current share price of JP¥1458.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mimaki Engineering paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Mimaki Engineering generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.6% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Mimaki Engineering

Click here to see how much of its profit Mimaki Engineering paid out over the last 12 months.

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 Mimaki Engineering's earnings have been skyrocketing, up 31% per annum for the past five years. Mimaki Engineering earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Mimaki Engineering has increased its dividend at approximately 21% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Mimaki Engineering for the upcoming dividend? It's great that Mimaki Engineering is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Mimaki Engineering, and we would prioritise taking a closer look at it.

In light of that, while Mimaki Engineering has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Mimaki Engineering that we recommend you consider before investing in the business.

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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.