The board of Shoei Foods Corporation (TSE:8079) has announced that it will be increasing its dividend by 4.2% on the 10th of July to ¥25.00, up from last year's comparable payment of ¥24.00. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
Check out our latest analysis for Shoei Foods
Shoei Foods' Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, Shoei Foods' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Unless the company can turn things around, EPS could fall by 3.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 34%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Shoei Foods Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥12.00 in 2014, and the most recent fiscal year payment was ¥48.00. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
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. Over the past five years, it looks as though Shoei Foods' EPS has declined at around 3.4% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Our Thoughts On Shoei Foods' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
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. Taking the debate a bit further, we've identified 1 warning sign for Shoei Foods that investors need to be conscious of moving forward. 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.
About TSE:8079
Shoei Foods
Engages in the import, purchase, and sale of food products in Japan and internationally.
Flawless balance sheet with solid track record and pays a dividend.
