Shoei Foods (TSE:8079) Has Announced That It Will Be Increasing Its Dividend To ¥30.00

Shoei Foods Corporation's (TSE:8079) dividend will be increasing from last year's payment of the same period to ¥30.00 on 10th of July. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

See our latest analysis for Shoei Foods

Shoei Foods' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Shoei Foods was paying only paying out a fraction of earnings, but the payment was a massive 203% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 5.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

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Shoei Foods 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 ¥17.00 in 2015 to the most recent total annual payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Shoei Foods May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Shoei Foods' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Shoei Foods could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Shoei Foods' Dividend

Overall, we always like to see the dividend being raised, but we don't think Shoei Foods will make a great income stock. While Shoei Foods is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Shoei Foods in our latest insider ownership analysis. 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.