Mitsubishi Chemical Group (TSE:4188) Has Affirmed Its Dividend Of ¥16.00
Mitsubishi Chemical Group Corporation's (TSE:4188) investors are due to receive a payment of ¥16.00 per share on 4th of June. Based on this payment, the dividend yield on the company's stock will be 3.6%, which is an attractive boost to shareholder returns.
Estimates Indicate Mitsubishi Chemical Group's Could Struggle to Maintain Dividend Payments In The Future
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Mitsubishi Chemical Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Over the next year, EPS is forecast to expand by 26.0%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 189% over the next year.
Check out our latest analysis for Mitsubishi Chemical Group
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥12.00 in 2015 to the most recent total annual payment of ¥32.00. This means that it has been growing its distributions at 10% per annum over that time. Mitsubishi Chemical Group 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.
There Isn't Much Room To Grow The Dividend
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 Chemical Group has impressed us by growing EPS at 9.9% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mitsubishi Chemical Group's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Mitsubishi Chemical Group 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 Chemical Group that investors should know about before committing capital to this stock. Is Mitsubishi Chemical Group 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.