Mitsubishi Gas Chemical Company's (TSE:4182) Dividend Will Be Increased To ¥50.00

Mitsubishi Gas Chemical Company, Inc. (TSE:4182) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of June to ¥50.00. This makes the dividend yield 3.5%, which is above the industry average.

See our latest analysis for Mitsubishi Gas Chemical Company

Mitsubishi Gas Chemical Company's Projected Earnings Seem Likely To Cover Future Distributions

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 1.9% over the next year. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.

Mitsubishi Gas Chemical Company Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥24.00 in 2014 to the most recent total annual payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Mitsubishi Gas Chemical Company has been growing its earnings per share at 6.5% a 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.

Our Thoughts On Mitsubishi Gas Chemical Company's Dividend

Overall, we always like to see the dividend being raised, but we don't think Mitsubishi Gas Chemical Company will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. 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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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.