Shoei Yakuhin Co.,Ltd.'s (TSE:3537) investors are due to receive a payment of ¥38.00 per share on 26th of June. This means the dividend yield will be fairly typical at 2.7%.
Check out 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. Prior to this announcement, Shoei YakuhinLtd's earnings easily covered the dividend, but free cash flows were negative. 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.
Over the next year, EPS could expand by 15.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.
Shoei YakuhinLtd Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ¥13.33 in 2015 to the most recent total annual payment of ¥38.00. This means that it has been growing its distributions at 12% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Shoei YakuhinLtd has impressed us by growing EPS at 15% 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.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shoei YakuhinLtd's payments, as there could be some issues with sustaining them into the future. While Shoei YakuhinLtd 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Shoei YakuhinLtd that you should be aware of before investing. 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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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.
