Shinnihon (TSE:1879) Will Pay A Dividend Of ¥28.00

The board of Shinnihon Corporation (TSE:1879) has announced that it will pay a dividend on the 3rd of December, with investors receiving ¥28.00 per share. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

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Shinnihon's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Shinnihon was paying only paying out a fraction of earnings, but the payment was a massive 147% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS could expand by 4.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Shinnihon

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥9.00, compared to the most recent full-year payment of ¥56.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Shinnihon has only grown its earnings per share at 4.0% per annum over the past five years. If Shinnihon is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Shinnihon (1 makes us a bit uncomfortable!) 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.