SHO-BOND HoldingsLtd (TSE:1414) Is Increasing Its Dividend To ¥78.00

The board of SHO-BOND Holdings Co.,Ltd. (TSE:1414) has announced that it will be paying its dividend of ¥78.00 on the 28th of September, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

See 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. Prior to this announcement, SHO-BOND HoldingsLtd's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 6.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥28.50, compared to the most recent full-year payment of ¥133.00. This means that it has been growing its distributions at 17% 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that SHO-BOND HoldingsLtd has grown earnings per share at 14% per year over the past five years. SHO-BOND HoldingsLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On SHO-BOND HoldingsLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While SHO-BOND HoldingsLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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.