The board of Mitsubishi Pencil Co., Ltd. (TSE:7976) has announced that it will pay a dividend of ¥21.00 per share on the 6th of September. Even though the dividend went up, the yield is still quite low at only 1.4%.
View our latest analysis for Mitsubishi Pencil
Mitsubishi Pencil's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Mitsubishi Pencil'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 13.3% 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 22% by next year, which is in a pretty sustainable range.
Mitsubishi Pencil Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥15.00 in 2014, and the most recent fiscal year payment was ¥36.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Mitsubishi Pencil has impressed us by growing EPS at 13% 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.
Mitsubishi Pencil Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Mitsubishi Pencil that you should be aware of before investing. 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.
About TSE:7976
Mitsubishi Pencil
Manufactures and supplies writing instruments in Japan.
Undervalued with excellent balance sheet and pays a dividend.
