MUGEN ESTATE Co.,Ltd. (TSE:3299) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of March to ¥68.00. This takes the dividend yield to 5.0%, which shareholders will be pleased with.
See our latest analysis for MUGEN ESTATELtd
MUGEN ESTATELtd's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, MUGEN ESTATELtd was paying a whopping 306% as a dividend, but this only made up 31% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 0.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is comfortable for the company to continue in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥6.00, compared to the most recent full-year payment of ¥68.00. This means that it has been growing its distributions at 27% per annum over that time. MUGEN ESTATELtd 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
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. MUGEN ESTATELtd has seen EPS rising for the last five years, at 12% per annum. MUGEN ESTATELtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On MUGEN ESTATELtd's Dividend
Overall, we always like to see the dividend being raised, but we don't think MUGEN ESTATELtd will make a great income stock. While MUGEN ESTATELtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for MUGEN ESTATELtd (of which 2 are potentially serious!) you should know about. 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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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.
About TSE:3299
MUGEN ESTATELtd
MUGEN ESTATE Co.,Ltd. purchases and resells used real estate properties in Japan.
Solid track record with adequate balance sheet and pays a dividend.
