Miyaji Engineering GroupInc (TSE:3431) Is Paying Out 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. The dividend yield will be 5.4% based on this payment which is still above the industry average.

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Miyaji Engineering GroupInc'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. Prior to this announcement, Miyaji Engineering GroupInc's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 6.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Miyaji Engineering GroupInc

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥5.00 in 2015 to the most recent total annual payment of ¥97.50. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. 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 Has Growth Potential

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. We are encouraged to see that Miyaji Engineering GroupInc has grown earnings per share at 6.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Miyaji Engineering GroupInc's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Miyaji Engineering GroupInc is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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. Is Miyaji Engineering GroupInc 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.