Shikibo (TSE:3109) Is Due To Pay A Dividend Of ¥50.00

Shikibo Ltd. (TSE:3109) will pay a dividend of ¥50.00 on the 1st of July. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Shikibo

Shikibo's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 73% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 9.8% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 87% in the next 12 months which is on the higher end of the range we would say is sustainable.

Shikibo Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. In the last five years, Shikibo's earnings per share has shrunk at approximately 9.8% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, a consistent dividend is a good thing, and we think that Shikibo has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Shikibo (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Shikibo 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.