Mitsubishi Motors, Subaru to boost shareholder returns
Japanese automakers using dividends to establish market trust
TOKYO -- Mitsubishi Motors and Subaru will strengthen their returns to shareholders, using cash on hand to build trust with investors as the business environment tightens due to such factors as slower growth in the U.S. market.
Mitsubishi Motors plans to raise its dividend to 14 yen per share for the current fiscal year ending March, a 4 yen increase from fiscal 2016. Its payout ratio is expected to be 31%. In fiscal 2013, when the automaker resumed paying dividends, the ratio was about 20%.
The company is expected to post a group net profit of 68 billion yen ($612 million) for this fiscal year, a sharp rebound from fiscal 2016's loss of 198.5 billion yen. Mitsubishi Motors wants to use the dividend hike to show that its fuel economy data manipulation scandal is behind it.
Mitsubishi Motors' net cash -- cash on hand less interest-bearing debt -- came to some 540 billion yen as of the end of fiscal 2016, about 115 billion yen more than in fiscal 2015. "We'll use funds to foster growth, such as by channeling them toward stalled research and development projects as well as capital investments, while focusing on stable dividends," said Koji Ikeya, executive vice president.
Subaru revised its target dividend payout ratio from a range of 20-40% to 30-50%. Seeking financial stability, the company has set a capital ratio goal of 50%. This ratio was 52.8% at the end of fiscal 2016, one percentage point higher than a year earlier. "After thinking about fulfilling financial stability while giving continuously stable returns to shareholders, we decided to raise the dividend payout ratio," explained Toshiaki Okada, corporate executive vice president.
Subaru's net profit is expected to rise 1% to 285 billion yen this fiscal year. Profit growth will slow as sales incentives increase in the U.S., its core market, and research and development costs pile up. Investors are wary of drops in automaker stocks because earnings in the industry are easily swayed by factors like economic conditions and foreign exchange rates. Subaru "wants to to build a long-term, trusting relationship with shareholders through continuous returns," said Okada.