Mitsui O.S.K. Lines (TSE:9104) Has Announced A Dividend Of ¥120.00

Mitsui O.S.K. Lines, Ltd. (TSE:9104) has announced that it will pay a dividend of ¥120.00 per share on the 26th of June. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

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

Mitsui O.S.K. Lines' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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 19.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 50%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥300.00. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. 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

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. Mitsui O.S.K. Lines has seen EPS rising for the last five years, at 50% per annum. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Mitsui O.S.K. Lines will make a great income stock. While Mitsui O.S.K. Lines is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Mitsui O.S.K. Lines you should be aware of, and 1 of them makes us a bit uncomfortable. 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.