Mitachi's (TSE:3321) Dividend Will Be ¥25.00

The board of Mitachi Co., Ltd. (TSE:3321) has announced that it will pay a dividend on the 26th of August, with investors receiving ¥25.00 per share. The dividend yield will be 4.7% based on this payment which is still above the industry average.

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Mitachi's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Mitachi was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 16.1% 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 24% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Mitachi

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 ¥20.00 in 2015, and the most recent fiscal year payment was ¥50.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Mitachi has grown earnings per share at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Mitachi's prospects of growing its dividend payments in the future.

Our Thoughts On Mitachi's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mitachi has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Is Mitachi 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.