Mitsui Mining & Smelting's (TSE:5706) Dividend Will Be ¥75.00

Mitsui Mining & Smelting Co., Ltd.'s (TSE:5706) investors are due to receive a payment of ¥75.00 per share on 30th of June. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

See our latest analysis for Mitsui Mining & Smelting

Mitsui Mining & Smelting's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Mitsui Mining & Smelting was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 15.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 20%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥40.00 total annually to ¥150.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mitsui Mining & Smelting has seen EPS rising for the last five years, at 57% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Mitsui Mining & Smelting's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Mitsui Mining & Smelting you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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