Mitsui Fudosan (TSE:8801) Is Increasing Its Dividend To ¥37.00

Mitsui Fudosan Co., Ltd. (TSE:8801) will increase its dividend from last year's comparable payment on the 1st of July to ¥37.00. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mitsui Fudosan's stock price has increased by 36% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Mitsui Fudosan

Mitsui Fudosan's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Mitsui Fudosan's dividend was only 29% of earnings, however it was paying out 5,458% of free 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 rise by 27.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mitsui Fudosan Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Mitsui Fudosan has only grown its earnings per share at 4.2% per annum over the past five years. While EPS growth is quite low, Mitsui Fudosan has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Mitsui Fudosan's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Mitsui Fudosan 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Mitsui Fudosan that investors should take into consideration. 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.