Mitsui Mining & Smelting's (TSE:5706) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mitsui Mining & Smelting Co., Ltd. (TSE:5706) has announced that it will be paying its dividend of ¥75.00 on the 11th of December, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.7%, which is below the industry average.

See our latest analysis for Mitsui Mining & Smelting

Mitsui Mining & Smelting's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Mitsui Mining & Smelting's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 6.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

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 ¥40.00 in 2014, and the most recent fiscal year payment was ¥145.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. 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. We are encouraged to see that Mitsui Mining & Smelting has grown earnings per share at 41% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Mitsui Mining & Smelting's Dividend

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. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Mitsui Mining & Smelting that you should be aware of before investing. 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.

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