Mie Kotsu Group Holdings' (TSE:3232) Dividend Will Be Increased To ¥8.00

Mie Kotsu Group Holdings, Inc. (TSE:3232) will increase its dividend from last year's comparable payment on the 23rd of June to ¥8.00. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Mie Kotsu Group Holdings

Mie Kotsu Group Holdings' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Mie Kotsu Group Holdings' dividend was only 18% of earnings, however it was paying out 112% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 2.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 25%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥5.00 in 2014 to the most recent total annual payment of ¥14.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Mie Kotsu Group Holdings May Find It Hard To Grow The Dividend

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. However, Mie Kotsu Group Holdings has only grown its earnings per share at 3.6% per annum over the past five years. While growth may be thin on the ground, Mie Kotsu Group Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Mie Kotsu Group Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Mie Kotsu Group Holdings will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've identified 3 warning signs for Mie Kotsu Group Holdings (2 are potentially serious!) that you should be aware of before investing. Is Mie Kotsu Group Holdings 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.