Mitsubishi HC Capital (TSE:8593) Is Increasing Its Dividend To ¥22.00

Mitsubishi HC Capital Inc. (TSE:8593) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of December to ¥22.00. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Mitsubishi HC Capital's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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.

Looking forward, earnings per share is forecast to rise by 6.0% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Mitsubishi HC Capital

Mitsubishi HC Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥9.50, compared to the most recent full-year payment of ¥45.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Mitsubishi HC Capital has been growing its earnings per share at 7.2% a 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.

Our Thoughts On Mitsubishi HC Capital's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mitsubishi HC Capital's payments are rock solid. While Mitsubishi HC Capital is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 2 warning signs for Mitsubishi HC Capital you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.