Meiji Electric IndustriesLtd (TSE:3388) Is Due To Pay A Dividend Of ¥30.00

Meiji Electric Industries Co.,Ltd. (TSE:3388) will pay a dividend of ¥30.00 on the 27th of November. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.

View our latest analysis for Meiji Electric IndustriesLtd

Meiji Electric IndustriesLtd's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Meiji Electric IndustriesLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 7.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥17.50, compared to the most recent full-year payment of ¥60.00. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Meiji Electric IndustriesLtd's earnings per share has fallen at approximately 7.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Meiji Electric IndustriesLtd has 2 warning signs (and 1 which can't be ignored) 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.