Shima Seiki Mfg.Ltd (TSE:6222) Is Due To Pay A Dividend Of ¥10.00

Shima Seiki Mfg.,Ltd. (TSE:6222) has announced that it will pay a dividend of ¥10.00 per share on the 29th of June. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

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Shima Seiki Mfg.Ltd's Future Dividend Projections Seem Positive

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even in the absence of profits, Shima Seiki Mfg.Ltd is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Earnings per share is forecast to rise by 106.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 77% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Shima Seiki Mfg.Ltd

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥32.50 total annually to ¥20.00. This works out to be a decline of approximately 4.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Shima Seiki Mfg.Ltd has impressed us by growing EPS at 13% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

Shima Seiki Mfg.Ltd's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Shima Seiki Mfg.Ltd will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for Shima Seiki Mfg.Ltd that you should be aware of before investing. Is Shima Seiki Mfg.Ltd not quite the opportunity you were looking for? Why not check out our selection of top 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.