Mutoh Holdings Co., Ltd. (TSE:7999) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to ¥74.00. This makes the dividend yield about the same as the industry average at 2.5%.
View our latest analysis for Mutoh Holdings
Mutoh Holdings' Payment Could Potentially Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Mutoh Holdings was paying a whopping 136% as a dividend, but this only made up 22% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Over the next year, EPS could expand by 63.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥72.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Mutoh Holdings has impressed us by growing EPS at 64% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Mutoh Holdings is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Mutoh Holdings that investors need to be conscious of moving forward. Is Mutoh Holdings 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.
About TSE:7999
Mutoh Holdings
Develops, manufactures, sells, maintains, and services information imaging equipment worldwide.
Flawless balance sheet with proven track record.
