MEC (TSE:4971) Is Due To Pay A Dividend Of ¥25.00

MEC Company Ltd.'s (TSE:4971) investors are due to receive a payment of ¥25.00 per share on 28th of February. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

Check out our latest analysis for MEC

MEC's Future Dividend Projections Appear Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, MEC's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 13.2%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥12.00 in 2014, and the most recent fiscal year payment was ¥45.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. MEC has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. MEC has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like MEC's Dividend

Overall, we like to see the dividend staying consistent, and we think MEC might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for MEC that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.