Mie Kotsu Group Holdings (TSE:3232) Is Increasing Its Dividend To ¥8.00

Mie Kotsu Group Holdings, Inc.'s (TSE:3232) dividend will be increasing from last year's payment of the same period to ¥8.00 on 23rd of June. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Mie Kotsu Group Holdings

Mie Kotsu Group Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Mie Kotsu Group Holdings was paying only paying out a fraction of earnings, but the payment was a massive 112% of 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.

Looking forward, earnings per share is forecast to rise by 1.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥5.00 in 2015 to the most recent total annual payment of ¥14.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

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 3.5% per annum over the past five years. While EPS growth is quite low, Mie Kotsu Group Holdings has the option to increase the payout ratio to return more cash to shareholders.

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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mie Kotsu Group Holdings has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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.