MISUMI Group (TSE:9962) Is Increasing Its Dividend To ¥20.59

MISUMI Group Inc.'s (TSE:9962) dividend will be increasing from last year's payment of the same period to ¥20.59 on 19th of June. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

MISUMI Group'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, prior to this announcement, MISUMI Group's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 9.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for MISUMI Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥11.28 in 2015 to the most recent total annual payment of ¥41.18. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. MISUMI Group has impressed us by growing EPS at 11% per year over the past five years. MISUMI Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

MISUMI Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that MISUMI Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for MISUMI Group that you should be aware of before investing. Is MISUMI Group 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.