DMG Mori's (TSE:6141) Upcoming Dividend Will Be Larger Than Last Year's

DMG Mori Co., Ltd.'s (TSE:6141) dividend will be increasing from last year's payment of the same period to ¥55.00 on 30th of March. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

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DMG Mori'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. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS is forecast to expand by 29.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 133% over the next year.

View our latest analysis for DMG Mori

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 dividend has gone from ¥24.00 total annually to ¥110.00. This means that it has been growing its distributions at 16% per annum 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.

DMG Mori's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. DMG Mori has seen EPS rising for the last five years, at 16% per annum. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

DMG Mori's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think DMG Mori's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for DMG Mori you should be aware of, and 1 of them shouldn't be ignored. Is DMG Mori 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.