Mitsui O.S.K. Lines (TSE:9104) Has Announced A Dividend Of ¥160.00

Mitsui O.S.K. Lines, Ltd. (TSE:9104) has announced that it will pay a dividend of ¥160.00 per share on the 26th of June. This will take the dividend yield to an attractive 6.4%, providing a nice boost to shareholder returns.

See 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. Mitsui O.S.K. Lines is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 20.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥13.33 in 2015, and the most recent fiscal year payment was ¥340.00. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Mitsui O.S.K. Lines has grown earnings per share 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.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Mitsui O.S.K. Lines has 3 warning signs (and 2 which make us uncomfortable) 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.