Why You Might Be Interested In Mitsui Mining & Smelting Co., Ltd. (TSE:5706) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Mitsui Mining & Smelting Co., Ltd. (TSE:5706) is about to go ex-dividend in just 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Mitsui Mining & Smelting investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 8th of December.

The company's next dividend payment will be JP¥100.00 per share, and in the last 12 months, the company paid a total of JP¥195 per share. Calculating the last year's worth of payments shows that Mitsui Mining & Smelting has a trailing yield of 1.7% on the current share price of JP¥11805.00. If you buy this business for its dividend, you should have an idea of whether Mitsui Mining & Smelting's dividend is reliable and sustainable. So we need to investigate whether Mitsui Mining & Smelting can afford its dividend, and if the dividend could grow.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Mitsui Mining & Smelting's payout ratio is modest, at just 26% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Mitsui Mining & Smelting

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Mitsui Mining & Smelting's earnings have been skyrocketing, up 88% per annum for the past five years. Mitsui Mining & Smelting is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Mitsui Mining & Smelting has increased its dividend at approximately 13% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Mitsui Mining & Smelting worth buying for its dividend? Mitsui Mining & Smelting has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

So while Mitsui Mining & Smelting looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Mitsui Mining & Smelting is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.