Mitsubishi Materials (TSE:5711) Will Pay A Dividend Of ¥50.00

Mitsubishi Materials Corporation (TSE:5711) will pay a dividend of ¥50.00 on the 12th of June. Based on this payment, the dividend yield for the company will be 4.0%, which is fairly typical for the industry.

View our latest analysis for Mitsubishi Materials

Mitsubishi Materials' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Mitsubishi Materials is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 0.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 24%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥80.00 in 2015, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Mitsubishi Materials has been growing its earnings per share at 41% a 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.

Our Thoughts On Mitsubishi Materials' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mitsubishi Materials' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Mitsubishi Materials is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 3 warning signs for Mitsubishi Materials (2 are significant!) that you should be aware of before investing. Is Mitsubishi Materials 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.