Mitsubishi Estate (TSE:8802) Will Pay A Larger Dividend Than Last Year At ¥22.00

Mitsubishi Estate Co., Ltd.'s (TSE:8802) dividend will be increasing from last year's payment of the same period to ¥22.00 on 30th of June. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

Mitsubishi Estate's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Mitsubishi Estate's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 5.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

See our latest analysis for Mitsubishi Estate

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥44.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mitsubishi Estate has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Mitsubishi Estate's prospects of growing its dividend payments in the future.

Our Thoughts On Mitsubishi Estate's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mitsubishi Estate's payments are rock solid. While Mitsubishi Estate is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs for Mitsubishi Estate (of which 1 is a bit concerning!) you should know about. Is Mitsubishi Estate 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.