Miyaji Engineering GroupInc (TSE:3431) Is Due To Pay A Dividend Of ¥55.00

The board of Miyaji Engineering Group,Inc. (TSE:3431) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥55.00 per share. Based on this payment, the dividend yield on the company's stock will be 5.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Miyaji Engineering GroupInc

Miyaji Engineering GroupInc's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Miyaji Engineering GroupInc was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Earnings per share could rise by 4.4% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 104%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥97.50. This means that it has been growing its distributions at 35% 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.

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. However, Miyaji Engineering GroupInc has only grown its earnings per share at 4.4% per annum over the past five years. The company has been growing at a pretty soft 4.4% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Miyaji Engineering GroupInc's payments, as there could be some issues with sustaining them into the future. While Miyaji Engineering GroupInc is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Miyaji Engineering GroupInc that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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