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 makes the dividend yield 4.4%, which is above the industry average.
View our latest analysis for MUGEN ESTATELtd
MUGEN ESTATELtd's Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, MUGEN ESTATELtd was paying only paying out a fraction of earnings, but the payment was a massive 306% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Looking forward, earnings per share is forecast to fall by 0.4% over the next year. 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. The dividend has gone from an annual total of ¥6.00 in 2014 to the most recent total annual payment of ¥68.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. 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
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that MUGEN ESTATELtd has been growing its earnings per share at 12% a year over the past five years. MUGEN ESTATELtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
Overall, we always like to see the dividend being raised, but we don't think MUGEN ESTATELtd will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for MUGEN ESTATELtd (2 are potentially serious!) that you should be aware of before investing. 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.
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.
