ShinMaywa Industries, Ltd. (TSE:7224) will pay a dividend of ¥25.00 on the 26th of June. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for ShinMaywa Industries
ShinMaywa Industries' Future Dividend Projections Appear Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, ShinMaywa Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 3.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥10.00 total annually to ¥49.50. This means that it has been growing its distributions at 17% per annum over that time. 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.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.2% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, ShinMaywa Industries has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On ShinMaywa Industries' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for ShinMaywa Industries that investors should know about before committing capital to this stock. Is ShinMaywa Industries 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.
About TSE:7224
ShinMaywa Industries
Engages in the manufacture and sale of transportation equipment in Japan, Asia, North America, and internationally.
Flawless balance sheet, good value and pays a dividend.
