Mitsubishi Research Institute (TSE:3636) Is Increasing Its Dividend To ¥80.00

Mitsubishi Research Institute, Inc.'s (TSE:3636) dividend will be increasing from last year's payment of the same period to ¥80.00 on 7th of June. This will take the annual payment to 3.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Mitsubishi Research Institute

Mitsubishi Research Institute's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Mitsubishi Research Institute's dividend was only 39% of earnings, however it was paying out 1,147% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 9.8%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Mitsubishi Research Institute Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥160.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Mitsubishi Research Institute has been growing its earnings per share at 16% a year over the past five years. Mitsubishi Research Institute definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Mitsubishi Research Institute's payments are rock solid. While Mitsubishi Research Institute is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Mitsubishi Research Institute that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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