Shimano's (TSE:7309) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Shimano Inc. (TSE:7309) has announced that it will be paying its dividend of ¥169.50 on the 3rd of September, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 1.7%, which is in line with the average for the industry.

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Shimano's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Shimano's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 7.2%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

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Shimano Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from ¥105.00 total annually to ¥339.00. This means that it has been growing its distributions at 12% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Shimano Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Shimano has seen EPS rising for the last five years, at 9.0% per annum. Shimano definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Shimano's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Shimano analysts we track are forecasting continued growth with our free report on analyst estimates for the company . Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.