Shikibo's (TSE:3109) Dividend Will Be ¥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 Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Shikibo was paying out 73% of earnings, but a comparatively small 52% of free cash flows. This leaves plenty of cash for reinvestment into the business.

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

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. Since 2014, the dividend has gone from ¥20.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. In the last five years, Shikibo's earnings per share has shrunk at approximately 9.8% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, we think Shikibo is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Case in point: We've spotted 3 warning signs for Shikibo (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.