MITSUI E&S (TSE:7003) Will Pay A Larger Dividend Than Last Year At ¥20.00

MITSUI E&S Co., Ltd. (TSE:7003) will increase its dividend from last year's comparable payment on the 27th of June to ¥20.00. Even though the dividend went up, the yield is still quite low at only 1.3%.

See our latest analysis for MITSUI E&S

MITSUI E&S' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, MITSUI E&S' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 33.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 5.5%, 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 most recent annual payment of ¥20.00 is about the same as the annual payment 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

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 MITSUI E&S has grown earnings per share at 71% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

MITSUI E&S Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that MITSUI E&S is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

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. Case in point: We've spotted 4 warning signs for MITSUI E&S (of which 2 are concerning!) you should know about. Is MITSUI E&S 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.