Mitsubishi HC Capital's (TSE:8593) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mitsubishi HC Capital Inc. (TSE:8593) has announced that it will be paying its dividend of ¥19.00 on the 10th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.7%, which is in line with the average for the industry.

See our latest analysis for Mitsubishi HC Capital

Mitsubishi HC Capital's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 120% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 47.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% 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 annual payment back then was ¥6.70, compared to the most recent full-year payment of ¥38.00. This means that it has been growing its distributions at 19% per annum 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.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. However, Mitsubishi HC Capital's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

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 don't think Mitsubishi HC Capital is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Mitsubishi HC Capital (of which 1 can't be ignored!) 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.