Mitsubishi HC Capital (TSE:8593) Has Announced That It Will Be Increasing Its Dividend To ¥20.00

The board of Mitsubishi HC Capital Inc. (TSE:8593) has announced that it will be paying its dividend of ¥20.00 on the 11th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Mitsubishi HC Capital

Mitsubishi HC Capital's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mitsubishi HC Capital's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 8.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

Mitsubishi HC Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥6.70 total annually to ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Mitsubishi HC Capital May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 2.2% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Mitsubishi HC Capital's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Mitsubishi HC Capital (of which 1 is concerning!) you should know about. 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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