Mitsui's (TSE:8031) Dividend Will Be Increased To ¥60.00

The board of Mitsui & Co., Ltd. (TSE:8031) has announced that it will be paying its dividend of ¥60.00 on the 19th of June, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

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Mitsui's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Mitsui was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 3.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Mitsui

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2016, the annual payment back then was ¥32.00, compared to the most recent full-year payment of ¥120.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Mitsui 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mitsui has seen EPS rising for the last five years, at 32% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Mitsui's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mitsui has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Mitsui 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.