Mitsui DM Sugar Holdings Co., Ltd. (TSE:2109) has announced that it will pay a dividend of ¥60.00 per share on the 24th of June. The dividend yield of 3.7% is still a nice boost to shareholder returns, despite the cut.
See our latest analysis for Mitsui DM Sugar Holdings
Mitsui DM Sugar Holdings' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mitsui DM Sugar Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS could expand by 14.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥35.00, compared to the most recent full-year payment of ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Mitsui DM Sugar Holdings has impressed us by growing EPS at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
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. For example, we've picked out 1 warning sign for Mitsui DM Sugar Holdings that investors should know about before committing capital to this stock. Is Mitsui DM Sugar Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
About TSE:2109
Mitsui DM Sugar Holdings
Manufactures and sells sugar and food materials in Japan.
Excellent balance sheet established dividend payer.
