Mitsui Chemicals' (TSE:4183) Dividend Will Be ¥75.00

Mitsui Chemicals, Inc. (TSE:4183) has announced that it will pay a dividend of ¥75.00 per share on the 3rd of December. The dividend yield will be 3.9% based on this payment which is still above the industry average.

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Mitsui Chemicals' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Mitsui Chemicals' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next 12 months is set to see EPS grow by 28.2%. If the dividend continues on its recent course, the payout ratio in 12 months could be 164%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Mitsui Chemicals

Mitsui Chemicals Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥150.00. This means that it has been growing its distributions at 17% 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.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. In the last five years, Mitsui Chemicals' earnings per share has shrunk at approximately 7.6% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 Mitsui Chemicals' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mitsui Chemicals' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 4 warning signs for Mitsui Chemicals that you should be aware of before investing. Is Mitsui Chemicals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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