Mitsui Mining & Smelting's (TSE:5706) Shareholders Will Receive A Bigger Dividend Than Last Year

Mitsui Mining & Smelting Co., Ltd. (TSE:5706) will increase its dividend from last year's comparable payment on the 8th of December to ¥100.00. Even though the dividend went up, the yield is still quite low at only 2.3%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mitsui Mining & Smelting's stock price has increased by 84% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Mitsui Mining & Smelting's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Mitsui Mining & Smelting was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 6.4%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Mitsui Mining & Smelting

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥60.00 in 2015 to the most recent total annual payment of ¥195.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Mitsui Mining & Smelting 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. Mitsui Mining & Smelting has impressed us by growing EPS at 29% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Mitsui Mining & Smelting Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Mitsui Mining & Smelting is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Mitsui Mining & Smelting that investors need to be conscious of moving forward. Is Mitsui Mining & Smelting 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.