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

Mie Kotsu Group Holdings, Inc. (TSE:3232) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of June to ¥8.00. This will take the annual payment to 2.9% 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' 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. Before making this announcement, Mie Kotsu Group Holdings was paying a whopping 112% as a dividend, but this only made up 8.2% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

EPS is set to fall by 2.3% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 25%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥5.00 in 2014, 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. 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.6% per annum over the last five years, which admittedly is a bit slow. 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.

In Summary

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. However, there are other things to consider for investors when analysing stock performance. To that end, Mie Kotsu Group Holdings has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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