Shinko Shoji's (TSE:8141) Dividend Will Be ¥6.50
Shinko Shoji Co., Ltd. (TSE:8141) will pay a dividend of ¥6.50 on the 17th of June. However, the dividend yield of 1.2% still remains in a typical range for the industry.
Shinko Shoji's Payment Could Potentially Have Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, Shinko Shoji's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
If the trend of the last few years continues, EPS will grow by 2.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Shinko Shoji
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥12.50. Doing the maths, this is a decline of about 1.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.9% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Shinko Shoji could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Even though the dividend was cut this year, we think Shinko Shoji has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
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. Just as an example, we've come across 2 warning signs for Shinko Shoji you should be aware of, and 1 of them is significant. Is Shinko Shoji not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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