There's A Lot To Like About MANAC Chemical PartnersLtd's (TSE:4360) Upcoming JP¥7.50 Dividend
MANAC Chemical Partners Co.,Ltd (TSE:4360) is about to trade ex-dividend in the next 2 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase MANAC Chemical PartnersLtd's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 25th of November.
The company's next dividend payment will be JP¥7.50 per share, and in the last 12 months, the company paid a total of JP¥15.00 per share. Last year's total dividend payments show that MANAC Chemical PartnersLtd has a trailing yield of 1.5% on the current share price of JP¥986.00. If you buy this business for its dividend, you should have an idea of whether MANAC Chemical PartnersLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. MANAC Chemical PartnersLtd is paying out just 10% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether MANAC Chemical PartnersLtd 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 15% of its cash flow last year.
It's positive to see that MANAC Chemical PartnersLtd'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.
Check out our latest analysis for MANAC Chemical PartnersLtd
Click here to see how much of its profit MANAC Chemical PartnersLtd paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at MANAC Chemical PartnersLtd, with earnings per share up 5.9% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, MANAC Chemical PartnersLtd has increased its dividend at approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Has MANAC Chemical PartnersLtd got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and MANAC Chemical PartnersLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but MANAC Chemical PartnersLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in MANAC Chemical PartnersLtd for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with MANAC Chemical PartnersLtd (including 1 which is a bit unpleasant).
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.