Mitsubishi Motors' (TSE:7211) Dividend Will Be ¥5.00

Mitsubishi Motors Corporation (TSE:7211) will pay a dividend of ¥5.00 on the 22nd of June. Despite the cut, the dividend yield of 2.7% will still be comparable to other companies in the industry.

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.

Mitsubishi Motors' Distributions May Be Difficult To Sustain

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even in the absence of profits, Mitsubishi Motors is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS is forecast to expand by 61.5%. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

See our latest analysis for Mitsubishi Motors

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥10.00. The dividend has shrunk at around 4.0% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mitsubishi Motors has impressed us by growing EPS at 47% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Mitsubishi Motors' Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. Strong earnings growth means Mitsubishi Motors has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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 picked out 1 warning sign for Mitsubishi Motors that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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.