Mie Kotsu Group Holdings' (TSE:3232) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mie Kotsu Group Holdings, Inc. (TSE:3232) has announced that it will be paying its dividend of ¥8.00 on the 23rd of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.7%, 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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Mie Kotsu Group Holdings was paying a whopping 112% as a dividend, but this only made up 19% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 1.5%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

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 annual payment during the last 10 years was ¥5.00 in 2015, and the most recent fiscal year payment was ¥14.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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.

Dividend Growth May Be Hard To Achieve

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 per share has been crawling upwards at 3.5% per year. 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

In summary, while it's always good to see the dividend being raised, we don't think Mie Kotsu Group Holdings' payments are rock solid. While Mie Kotsu Group Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Mie Kotsu Group Holdings (of which 1 is a bit concerning!) 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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