Mercuria Holdings (TSE:7347) Is Due To Pay A Dividend Of ¥22.00

Mercuria Holdings Co., Ltd. (TSE:7347) has announced that it will pay a dividend of ¥22.00 per share on the 26th of March. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.

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Estimates Indicate Mercuria Holdings' Could Struggle to Maintain Dividend Payments In The Future

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the dividend made up 626% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, EPS could fall by 46.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 1,200%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Mercuria Holdings

Mercuria Holdings Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from ¥20.00 total annually to ¥22.00. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Earnings per share has been sinking by 46% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Mercuria Holdings' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Mercuria Holdings make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Mercuria Holdings (2 are significant!) that you should be aware of before investing. Is Mercuria Holdings 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.