Should You Buy Meiko Network Japan Co., Ltd. (TSE:4668) For Its Upcoming Dividend?
Meiko Network Japan Co., Ltd. (TSE:4668) is about to trade ex-dividend in the next four 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. Thus, you can purchase Meiko Network Japan's shares before the 28th of August in order to receive the dividend, which the company will pay on the 25th of November.
The company's next dividend payment will be JP¥15.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Last year's total dividend payments show that Meiko Network Japan has a trailing yield of 3.9% on the current share price of JP¥776.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Meiko Network Japan paid out a comfortable 50% of its profit last year. A useful secondary check can be to evaluate whether Meiko Network Japan generated enough free cash flow to afford its dividend. It paid out 84% 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 Meiko Network Japan'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 Meiko Network Japan
Click here to see how much of its profit Meiko Network Japan paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Meiko Network Japan's earnings per share have been growing at 19% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Meiko Network Japan's dividend payments per share have declined at 2.3% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
From a dividend perspective, should investors buy or avoid Meiko Network Japan? 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. There's a lot to like about Meiko Network Japan, and we would prioritise taking a closer look at it.
In light of that, while Meiko Network Japan has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Meiko Network Japan you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.