Mitsui O.S.K. Lines' (TSE:9104) Dividend Will Be ¥160.00

Mitsui O.S.K. Lines, Ltd.'s (TSE:9104) investors are due to receive a payment of ¥160.00 per share on 26th of June. This makes the dividend yield 6.1%, which is above the industry average.

View our latest analysis for Mitsui O.S.K. Lines

Mitsui O.S.K. Lines' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Mitsui O.S.K. Lines was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 17.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥20.00 in 2015 to the most recent total annual payment of ¥340.00. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. Mitsui O.S.K. Lines has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend 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. Mitsui O.S.K. Lines has impressed us by growing EPS at 51% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. For example, we've identified 3 warning signs for Mitsui O.S.K. Lines (2 shouldn't be ignored!) that you should be aware of before investing. 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.