Mitachi Co., Ltd. (TSE:3321) will pay a dividend of ¥20.00 on the 28th of August. The dividend yield of 3.4% is still a nice boost to shareholder returns, despite the cut.
See our latest analysis for Mitachi
Mitachi's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Mitachi's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 4.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥14.00 in 2014, and the most recent fiscal year payment was ¥40.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Mitachi May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Mitachi could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Mitachi's Dividend
Even though the dividend was cut this year, we think Mitachi has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Mitachi that investors should know about before committing capital to this stock. 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.
About TSE:3321
Mitachi
Operates as an electronics trading company in Japan and internationally.
Flawless balance sheet established dividend payer.
