Mitsubishi Gas Chemical Company's (TSE:4182) Shareholders Will Receive A Bigger Dividend Than Last Year

Mitsubishi Gas Chemical Company, Inc.'s (TSE:4182) dividend will be increasing from last year's payment of the same period to ¥50.00 on 6th of June. This makes the dividend yield 4.1%, 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. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 17.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, 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. Since 2015, the dividend has gone from ¥28.00 total annually to ¥100.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Mitsubishi Gas Chemical Company has grown earnings per share 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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Mitsubishi Gas Chemical Company that investors should take into consideration. 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.