Mitsui DM Sugar Holdings Co., Ltd.'s (TSE:2109) investors are due to receive a payment of ¥60.00 per share on 24th of June. However, the dividend yield of 3.6% is still a decent boost to shareholder returns.
View our latest analysis for Mitsui DM Sugar Holdings
Mitsui DM Sugar Holdings' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Mitsui DM Sugar Holdings was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
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
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥35.00 in 2014 to the most recent total annual payment of ¥120.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Mitsui DM Sugar Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Mitsui DM Sugar Holdings has been growing its earnings per share at 15% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Mitsui DM Sugar Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Mitsui DM Sugar Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:2109
Mitsui DM Sugar Holdings
Manufactures and sells sugar and food materials in Japan.
Excellent balance sheet established dividend payer.
