The board of Shoei Yakuhin Co.,Ltd. (TSE:3537) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥38.00 per share. This payment means that the dividend yield will be 2.8%, which is around the industry average.
View our latest analysis for Shoei YakuhinLtd
Shoei YakuhinLtd's Payment Could Potentially Have Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Shoei YakuhinLtd's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 15.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.
Shoei YakuhinLtd Doesn't Have A Long Payment History
Shoei YakuhinLtd's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was ¥13.33 in 2016, and the most recent fiscal year payment was ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Shoei YakuhinLtd has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
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 Shoei YakuhinLtd has been growing its earnings per share at 16% 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.
We Really Like Shoei YakuhinLtd's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Shoei YakuhinLtd that investors should know about before committing capital to this stock. 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:3537
Shoei YakuhinLtd
Engages in trading of chemicals, daily necessities, and civil engineering and construction materials in Japan and internationally.
Solid track record with excellent balance sheet.
