SHO-BOND Holdings Co.,Ltd. (TSE:1414) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of September to ¥78.00. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.
Check out our latest analysis for SHO-BOND HoldingsLtd
SHO-BOND HoldingsLtd's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. SHO-BOND HoldingsLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 3.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend.
SHO-BOND HoldingsLtd Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥28.50 total annually to ¥128.00. This means that it has been growing its distributions at 16% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that SHO-BOND HoldingsLtd has been growing its earnings per share at 14% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On SHO-BOND HoldingsLtd's Dividend
In summary, while it's always good to see the dividend being raised, we don't think SHO-BOND HoldingsLtd's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
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. As an example, we've identified 1 warning sign for SHO-BOND HoldingsLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:1414
SHO-BOND HoldingsLtd
Engages in repairing and reinforcing social infrastructures in Japan.
Flawless balance sheet established dividend payer.
