Mitsubishi Gas Chemical Company (TSE:4182) Is Due To Pay A Dividend Of ¥40.00

The board of Mitsubishi Gas Chemical Company, Inc. (TSE:4182) has announced that it will pay a dividend of ¥40.00 per share on the 10th of June. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

View our latest analysis for Mitsubishi Gas Chemical Company

Mitsubishi Gas Chemical Company's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Mitsubishi Gas Chemical Company was paying a whopping 147% as a dividend, but this only made up 37% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 21.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mitsubishi Gas Chemical Company Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥24.00 in 2014, and the most recent fiscal year payment was ¥80.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Mitsubishi Gas Chemical Company's earnings per share has shrunk at approximately 6.5% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Mitsubishi Gas Chemical Company's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mitsubishi Gas Chemical Company's payments, as there could be some issues with sustaining them into the future. While Mitsubishi Gas Chemical Company is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Mitsubishi Gas Chemical Company that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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