MISUMI Group's (TSE:9962) Shareholders Will Receive A Smaller Dividend Than Last Year

MISUMI Group Inc.'s (TSE:9962) dividend is being reduced from last year's payment covering the same period to ¥17.71 on the 3rd of December. Despite the cut, the dividend yield of 1.8% 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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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.

Looking forward, earnings per share is forecast to rise by 9.6% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

View 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. Since 2015, the annual payment back then was ¥12.61, compared to the most recent full-year payment of ¥39.25. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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.

The Dividend Looks Likely To Grow

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. MISUMI Group has seen EPS rising for the last five years, at 19% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

MISUMI Group Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like MISUMI Group does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for MISUMI Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.