Shimano (TSE:7309) Is Due To Pay A Dividend Of ¥169.50

Shimano Inc.'s (TSE:7309) investors are due to receive a payment of ¥169.50 per share on 30th of March. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.

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Shimano's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Shimano's dividend was only 56% of earnings, however it was paying out 150% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 21.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Shimano

Shimano Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥105.00 in 2015 to the most recent total annual payment of ¥339.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Unfortunately, Shimano's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Shimano's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Shimano is earning enough to cover the payments, the cash flows are lacking. We don't think Shimano is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Shimano that you should be aware of before investing. 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.