Mitani Sangyo (TSE:8285) Will Pay A Dividend Of ¥4.50

Mitani Sangyo Co., Ltd.'s (TSE:8285) investors are due to receive a payment of ¥4.50 per share on 4th of December. This means the dividend yield will be fairly typical at 2.5%.

Check out our latest analysis for Mitani Sangyo

Mitani Sangyo's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Mitani Sangyo's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 0.2% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

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 ¥6.00 in 2014 to the most recent total annual payment of ¥9.00. This means that it has been growing its distributions at 4.1% per annum over that time. 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's Growth Prospects Are Limited

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. Mitani Sangyo hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, Mitani Sangyo has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Mitani Sangyo's Dividend

Overall, a consistent dividend is a good thing, and we think that Mitani Sangyo has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. For example, we've identified 3 warning signs for Mitani Sangyo (1 is significant!) that you should be aware of before investing. Is Mitani Sangyo 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.

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