Mitsui O.S.K. Lines (TSE:9104) Is Due To Pay A Dividend Of ¥120.00

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 5.7%, providing a nice boost to shareholder returns.

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

Mitsui O.S.K. Lines' Projected Earnings Seem Likely To Cover Future Distributions

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 16.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business 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 annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥300.00. This implies that the company grew its distributions at a yearly rate of about 31% 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 see if earnings per share is growing. It's encouraging to see that Mitsui O.S.K. Lines has been growing its earnings per share at 51% 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 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Mitsui O.S.K. Lines has 3 warning signs (and 1 which is a bit concerning) 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.