Mitsubishi Pencil Co., Ltd.'s (TSE:7976) investors are due to receive a payment of ¥21.00 per share on 6th of September. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.
See our latest analysis for Mitsubishi Pencil
Mitsubishi Pencil's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Mitsubishi Pencil 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 10.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Mitsubishi Pencil Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥15.00 in 2014 to the most recent total annual payment of ¥42.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Mitsubishi Pencil has impressed us by growing EPS at 13% per year over the past five years. Mitsubishi Pencil definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Mitsubishi Pencil's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Mitsubishi Pencil stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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About TSE:7976
Mitsubishi Pencil
Manufactures and supplies writing instruments in Japan.
Undervalued with excellent balance sheet and pays a dividend.
