Mitsubishi Paper Mills (TSE:3864) Will Pay A Dividend Of ¥15.00

The board of Mitsubishi Paper Mills Limited (TSE:3864) has announced that it will pay a dividend of ¥15.00 per share on the 9th of June. This payment means that the dividend yield will be 2.3%, which is around the industry average.

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Mitsubishi Paper Mills' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, Mitsubishi Paper Mills' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 56.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Mitsubishi Paper Mills

Mitsubishi Paper Mills Doesn't Have A Long Payment History

It is great to see that Mitsubishi Paper Mills has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from ¥5.00 total annually to ¥15.00. This means that it has been growing its distributions at 15% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Mitsubishi Paper Mills has been growing its earnings per share at 56% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Mitsubishi Paper Mills' Dividend

Overall, we like to see the dividend staying consistent, and we think Mitsubishi Paper Mills might even raise payments in the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Mitsubishi Paper Mills (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.