Mebuki Financial GroupInc (TSE:7167) Is Paying Out A Larger Dividend Than Last Year

Mebuki Financial Group,Inc. (TSE:7167) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of December to ¥7.00. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

See our latest analysis for Mebuki Financial GroupInc

Mebuki Financial GroupInc's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Mebuki Financial GroupInc has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Mebuki Financial GroupInc would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 15.4%. If the dividend continues on this path, the future payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥7.69 in 2014, and the most recent fiscal year payment was ¥14.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Mebuki Financial GroupInc might have put its house in order since then, but we remain cautious.

Mebuki Financial GroupInc May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 2.7% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Mebuki Financial GroupInc 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.

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