MISUMI Group (TSE:9962) Is Reducing Its Dividend To ¥18.86

MISUMI Group Inc. (TSE:9962) is reducing its dividend from last year's comparable payment to ¥18.86 on the 3rd of December. Despite the cut, the dividend yield of 2.0% will still be comparable to other companies in the industry.

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MISUMI Group's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, MISUMI Group was easily earning enough to cover the dividend. 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 6.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for MISUMI Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥11.28 total annually to ¥40.78. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. MISUMI Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that MISUMI Group has grown earnings per share at 18% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like MISUMI Group's Dividend

Overall, we think that MISUMI Group could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income 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. For example, we've picked out 1 warning sign for MISUMI Group that investors should know about before committing capital to this stock. 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.