MUGEN ESTATELtd (TSE:3299) Is Increasing Its Dividend To ¥68.00

MUGEN ESTATE Co.,Ltd. (TSE:3299) will increase its dividend from last year's comparable payment on the 28th of March to ¥68.00. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

See our latest analysis for MUGEN ESTATELtd

MUGEN ESTATELtd's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, MUGEN ESTATELtd was paying a whopping 306% as a dividend, but this only made up 31% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to fall by 0.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 37%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 ¥6.00 in 2014, and the most recent fiscal year payment was ¥68.00. This means that it has been growing its distributions at 27% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that MUGEN ESTATELtd has been growing its earnings per share at 12% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On MUGEN ESTATELtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While MUGEN ESTATELtd is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, MUGEN ESTATELtd has 3 warning signs (and 2 which are a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.