Mitsui Boosts Dividend Ratio While Forecasting 10% Profit Drop

Mitsui & Co., Japan’s second-largest trading house, raised its dividend ratio to 30 percent, the highest in six years.

The increase from a 25 percent ratio last year is part of a two-year plan outlined by the Tokyo-based company today. Mitsui forecast profit will drop 10 percent to 380 billion yen ($3.7 billion) in the year to March 31 on lower oil and iron ore prices.

The higher payout ratio means Mitsui estimates this year’s dividend will rise to a record 64 yen per share from 59 yen. That would be biggest amount the trader has returned to investors since at least 1987, the earliest data available to Bloomberg. The company also carried out its first share buyback in more than a decade in February, spending 50 billion yen.

As the China-led, decade-long rally in commodity prices winds down, Japanese trading houses are left with excess cash and a need to boost attractiveness to investors. Shares in the companies, which include Mitsubishi Corp. and Sumitomo Corp., have lagged the gain in Japan’s stocks since Shinzo Abe was elected prime minister 16 months ago.

The Topix has added 47 percent since Dec. 1, 2012, while shares of Mitsubishi have gained 17 percent, Mitsui has increased 27 percent and Sumitomo is up 23 percent in the time.

Net income jumped 37 percent to 422.2 billion yen in the year ended March 31, beating its 370 billion yen forecast, Mitsui said today. The company will switch to reporting according to international accounting standards, or IFRS rules, from the Generally Accepted Accounting Principles, or GAAP, from this fiscal year.

Future Buybacks

Mitsui will be “flexible” in deciding on further stock buybacks, Chief Financial Officer Joji Okada told reporters in Tokyo today.

Together with Mitsubishi, Japan’s biggest trading house, Mitsui may return 300 billion yen to investors this fiscal year, according to UBS AG analyst Katsuya Takeuchi. Mitsubishi reports its financial results tomorrow.

Mitsui’s increased dividend ratio comes after Mitsubishi last year revised its policy to pay 50 yen a share plus 30 percent of any profit the company earns above 350 billion yen. Mitsubishi estimated a 60 yen dividend for last fiscal year.

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