Mutoh Holdings (TSE:7999) Is Increasing Its Dividend To ¥74.00

Mutoh Holdings Co., Ltd. (TSE:7999) will increase its dividend on the 27th of June to ¥74.00, which is 85% higher than last year's payment from the same period of ¥40.00. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

View our latest analysis for Mutoh Holdings

Mutoh Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Mutoh Holdings was paying only paying out a fraction of earnings, but the payment was a massive 144% of cash flows. 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.

If the trend of the last few years continues, EPS will grow by 63.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥50.00 in 2014, and the most recent fiscal year payment was ¥76.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Mutoh Holdings has been growing its earnings per share at 64% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Mutoh Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mutoh Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Mutoh Holdings that investors should take into consideration. 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.