Mitsubishi Gas Chemical Company (TSE:4182) Has Announced That It Will Be Increasing Its Dividend To ¥50.00

The board of Mitsubishi Gas Chemical Company, Inc. (TSE:4182) has announced that it will be paying its dividend of ¥50.00 on the 6th of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.2%, which shareholders will be pleased with.

View our latest analysis for Mitsubishi Gas Chemical Company

Mitsubishi Gas Chemical Company's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Mitsubishi Gas Chemical Company 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.

Looking forward, earnings per share is forecast to rise by 17.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Mitsubishi Gas Chemical Company Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥28.00, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 14% 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 Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Mitsubishi Gas Chemical Company has impressed us by growing EPS at 14% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Mitsubishi Gas Chemical Company's payments are rock solid. While Mitsubishi Gas Chemical Company is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Mitsubishi Gas Chemical Company that investors should know about before committing capital to this stock. Is Mitsubishi Gas Chemical Company not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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