Mainichi Comnet (TSE:8908) Has Announced That It Will Be Increasing Its Dividend To ¥22.00

Mainichi Comnet Co., Ltd. (TSE:8908) will increase its dividend on the 28th of August to ¥22.00, which is 10% higher than last year's payment from the same period of ¥20.00. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

See our latest analysis for Mainichi Comnet

Mainichi Comnet's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Mainichi Comnet'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 could rise by 2.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mainichi Comnet Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥8.00 total annually to ¥28.00. This implies that the company grew its distributions at a yearly rate of about 13% 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 could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.4% per year. While growth may be thin on the ground, Mainichi Comnet could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Mainichi Comnet is earning enough to cover the payments, the cash flows are lacking. We don't think Mainichi Comnet is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Mainichi Comnet (of which 1 is concerning!) 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.