Shimojima (TSE:7482) Is Due To Pay A Dividend Of ¥27.00

Shimojima Co., Ltd.'s (TSE:7482) investors are due to receive a payment of ¥27.00 per share on 4th of December. This makes the dividend yield 4.0%, which is above the industry average.

View our latest analysis for Shimojima

Shimojima's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Shimojima's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 35.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥22.00 in 2014, and the most recent fiscal year payment was ¥54.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Shimojima has seen EPS rising for the last five years, at 36% per annum. Shimojima is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Shimojima's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Shimojima that investors should take into consideration. Is Shimojima 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.