Mitsubishi Chemical Group's (TSE:4188) Dividend Will Be ¥16.00

Mitsubishi Chemical Group Corporation (TSE:4188) will pay a dividend of ¥16.00 on the 4th of June. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

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Mitsubishi Chemical Group's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 232% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 28%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

The next 12 months is set to see EPS grow by 26.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 188% over the next year.

See our latest analysis for Mitsubishi Chemical Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥32.00. This means that it has been growing its distributions at 10% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Mitsubishi Chemical Group has been growing its earnings per share at 9.9% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mitsubishi Chemical Group's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 4 warning signs for Mitsubishi Chemical Group that investors should know about before committing capital to this stock. Is Mitsubishi Chemical Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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