Mitsubishi HC Capital's (TSE:8593) Dividend Will Be ¥20.00

The board of Mitsubishi HC Capital Inc. (TSE:8593) has announced that it will pay a dividend of ¥20.00 per share on the 9th of June. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Mitsubishi HC Capital

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

Impressive dividend yields are good, but this doesn't matter much if the payments 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. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 7.8% over the next year. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Mitsubishi HC Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥8.20 in 2014, and the most recent fiscal year payment was ¥40.00. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.