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MEC (TSE:4971) Is Paying Out A Larger Dividend Than Last Year

Simply Wall St · 22h ago

The board of MEC Company Ltd. (TSE:4971) has announced that it will be paying its dividend of ¥60.00 on the 4th of March, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that MEC's stock price has increased by 69% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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MEC's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, MEC was paying a whopping 185% as a dividend, but this only made up 31% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 20.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

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TSE:4971 Historic Dividend December 4th 2025

See our latest analysis for MEC

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥85.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. MEC has impressed us by growing EPS at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On MEC's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While MEC is earning enough to cover the payments, the cash flows are lacking. We don't think MEC 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for MEC that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.