Nasdaq
華爾街日報Mitsui Kinzoku Company's (TSE:5706) Upcoming Dividend Will Be Larger Than Last Year's
Mitsui Kinzoku Company, Limited (TSE:5706) will increase its dividend from last year's comparable payment on the 30th of June to ¥110.00. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mitsui Kinzoku Company's stock price has increased by 71% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Mitsui Kinzoku Company's Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Mitsui Kinzoku Company's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 8.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.
View our latest analysis for Mitsui Kinzoku Company
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥60.00, compared to the most recent full-year payment of ¥220.00. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Mitsui Kinzoku Company has grown earnings per share at 15% per year over the past five years. Mitsui Kinzoku Company definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Mitsui Kinzoku Company's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Mitsui Kinzoku Company has 2 warning signs (and 1 which is significant) we think you should know about. Is Mitsui Kinzoku Company not quite the opportunity you were looking for? Why not check out 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.