Mitsui O.S.K. Lines, Ltd. (TSE:9104) will pay a dividend of ¥120.00 on the 26th of June. This will take the dividend yield to an attractive 5.6%, providing a nice boost to shareholder returns.
View our latest analysis for Mitsui O.S.K. Lines
Mitsui O.S.K. Lines' 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. Prior to this announcement, Mitsui O.S.K. Lines' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
EPS is set to fall by 16.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥20.00 total annually to ¥300.00. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
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. Mitsui O.S.K. Lines has impressed us by growing EPS at 50% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Our Thoughts On Mitsui O.S.K. Lines' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Mitsui O.S.K. Lines' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Mitsui O.S.K. Lines is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mitsui O.S.K. Lines has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Mitsui O.S.K. Lines 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:9104
Mitsui O.S.K. Lines
Engages in the marine transportation business in Japan and internationally.
Adequate balance sheet average dividend payer.
