Mitsubishi Paper Mills' (TSE:3864) Shareholders Will Receive A Bigger Dividend Than Last Year

Mitsubishi Paper Mills Limited (TSE:3864) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of June to ¥15.00. This makes the dividend yield about the same as the industry average at 2.3%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mitsubishi Paper Mills' stock price has increased by 36% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Mitsubishi Paper Mills

Mitsubishi Paper Mills' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Mitsubishi Paper Mills was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 20.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 8.5% by next year, which we think can be pretty sustainable going forward.

Mitsubishi Paper Mills Is Still Building Its Track Record

It is great to see that Mitsubishi Paper Mills has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ¥5.00 in 2018 to the most recent total annual payment of ¥15.00. This means that it has been growing its distributions at 17% per annum over that time. Mitsubishi Paper Mills has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Mitsubishi Paper Mills has impressed us by growing EPS at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Mitsubishi Paper Mills' Dividend

Overall, a dividend increase is always good, and we think that Mitsubishi Paper Mills is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Mitsubishi Paper Mills you should be aware of, and 1 of them is significant. 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.