Mitsubishi Pencil's (TSE:7976) Dividend Will Be ¥21.00

The board of Mitsubishi Pencil Co., Ltd. (TSE:7976) has announced that it will pay a dividend on the 6th of September, with investors receiving ¥21.00 per share. This makes the dividend yield about the same as the industry average at 1.5%.

View our latest analysis for Mitsubishi Pencil

Mitsubishi Pencil's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Mitsubishi Pencil's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 12.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

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 ¥36.00. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Mitsubishi Pencil has grown earnings per share at 12% per year over the past five years. 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.

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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Mitsubishi Pencil that investors should know about before committing capital to this stock. Is Mitsubishi Pencil not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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