Is It Worth Considering Direct Marketing MiX Inc. (TSE:7354) For Its Upcoming Dividend?

Readers hoping to buy Direct Marketing MiX Inc. (TSE:7354) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Thus, you can purchase Direct Marketing MiX's shares before the 29th of December in order to receive the dividend, which the company will pay on the 11th of March.

The company's next dividend payment will be JP¥7.00 per share, on the back of last year when the company paid a total of JP¥7.00 to shareholders. Looking at the last 12 months of distributions, Direct Marketing MiX has a trailing yield of approximately 2.4% on its current stock price of JP¥297.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Direct Marketing MiX paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 7.8% of its cash flow last year.

It's positive to see that Direct Marketing MiX'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 Direct Marketing MiX

Click here to see how much of its profit Direct Marketing MiX paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Direct Marketing MiX's 5.6% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, Direct Marketing MiX has lifted its dividend by approximately 7.0% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Direct Marketing MiX? Direct Marketing MiX has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Direct Marketing MiX from a dividend perspective.

In light of that, while Direct Marketing MiX has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Direct Marketing MiX has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.