Shikibo (TSE:3109) Is Paying Out A Dividend Of ¥25.00

Shikibo Ltd. (TSE:3109) will pay a dividend of ¥25.00 on the 30th of June. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

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Shikibo's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Shikibo is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 7.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Shikibo

Shikibo Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥50.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Shikibo's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Shikibo has been growing its earnings per share at 7.3% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Shikibo's prospects of growing its dividend payments in the future.

Our Thoughts On Shikibo's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Shikibo is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Shikibo (1 shouldn't be ignored!) 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.