Mitsubishi HC Capital's (TSE:8593) Shareholders Will Receive A Bigger Dividend Than Last Year

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. This makes the dividend yield 4.2%, which is above the industry average.

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Mitsubishi HC Capital's Projected Earnings Seem Likely To Cover Future Distributions

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. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 7.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

View 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. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 3.5% per year. Mitsubishi HC Capital is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Mitsubishi HC Capital has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is Mitsubishi HC Capital 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.