Mitsubishi Materials' (TSE:5711) Dividend Will Be ¥50.00
Mitsubishi Materials Corporation (TSE:5711) will pay a dividend of ¥50.00 on the 11th of June. This means the dividend yield will be fairly typical at 3.0%.
Mitsubishi Materials' Projected Earnings Seem Likely To Cover Future Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Mitsubishi Materials was paying out 88% of earnings, but a comparatively small 10% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to expand by 28.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 68% which brings it into quite a comfortable range.
Check out our latest analysis for Mitsubishi Materials
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥80.00, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 2.3% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth Could Be Constrained
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. Mitsubishi Materials has impressed us by growing EPS at 20% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Our Thoughts On Mitsubishi Materials' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Mitsubishi Materials 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 4 warning signs for Mitsubishi Materials that investors should know about before committing capital to this stock. Is Mitsubishi Materials not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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