Shoei YakuhinLtd (TSE:3537) Is Paying Out A Dividend Of ¥36.00

The board of Shoei Yakuhin Co.,Ltd. (TSE:3537) has announced that it will pay a dividend of ¥36.00 per share on the 26th of June. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Shoei YakuhinLtd

Shoei YakuhinLtd's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Shoei YakuhinLtd's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 8.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shoei YakuhinLtd Is Still Building Its Track Record

It is great to see that Shoei YakuhinLtd has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ¥13.33 in 2016 to the most recent total annual payment of ¥36.00. This means that it has been growing its distributions at 13% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Shoei YakuhinLtd has grown earnings per share at 8.6% per year over the past five years. Shoei YakuhinLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Shoei YakuhinLtd that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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