Mitsubishi HC Capital (TSE:8593) Will Pay A Dividend Of ¥20.00

The board of Mitsubishi HC Capital Inc. (TSE:8593) has announced that it will pay a dividend on the 9th of June, with investors receiving ¥20.00 per share. This makes the dividend yield 3.9%, which is above the industry average.

See our latest analysis for Mitsubishi HC Capital

Mitsubishi HC Capital's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Mitsubishi HC Capital was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 8.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mitsubishi HC Capital 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. Since 2015, the dividend has gone from ¥8.20 total annually to ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Mitsubishi HC Capital hasn't seen much change in its earnings per share over the last five years. Mitsubishi HC Capital is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Mitsubishi HC Capital's Dividend

Overall, we always like to see the dividend being raised, but we don't think Mitsubishi HC Capital will make a great income stock. While Mitsubishi HC Capital is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Mitsubishi HC Capital has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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