MITSUI E&S Co., Ltd. (TSE:7003) Is About To Go Ex-Dividend, And It Pays A 1.4% Yield
Readers hoping to buy MITSUI E&S Co., Ltd. (TSE:7003) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, MITSUI E&S investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 11th of December.
The company's next dividend payment will be JP¥30.00 per share, and in the last 12 months, the company paid a total of JP¥60.00 per share. Last year's total dividend payments show that MITSUI E&S has a trailing yield of 1.4% on the current share price of JP¥4363.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MITSUI E&S is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. MITSUI E&S paid out more free cash flow than it generated - 161%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While MITSUI E&S's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were MITSUI E&S to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for MITSUI E&S
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see MITSUI E&S's earnings have been skyrocketing, up 198% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MITSUI E&S has delivered an average of 4.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because MITSUI E&S is keeping back more of its profits to grow the business.
The Bottom Line
Has MITSUI E&S got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's hard to get excited about MITSUI E&S from a dividend perspective.
While it's tempting to invest in MITSUI E&S for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for MITSUI E&S you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.