Mie Kotsu Group Holdings, Inc.'s (TSE:3232) investors are due to receive a payment of ¥6.00 per share on 26th of June. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Mie Kotsu Group Holdings
Mie Kotsu Group Holdings' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Mie Kotsu Group Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once 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 ¥11.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 2.8% per year. While EPS growth is quite low, Mie Kotsu Group Holdings has the option to increase the payout ratio to return more cash to shareholders.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Mie Kotsu Group Holdings has 2 warning signs (and 1 which is significant) we think you should know about. 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.
About TSE:3232
Mie Kotsu Group Holdings
Engages in the transportation, real estate, distribution, and leisure service businesses in Japan and internationally.
Solid track record and fair value.
