Shoei Foods (TSE:8079) Is Increasing Its Dividend To ¥30.00

The board of Shoei Foods Corporation (TSE:8079) has announced that it will be paying its dividend of ¥30.00 on the 10th of July, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.5%.

View our latest analysis for Shoei Foods

Shoei Foods' Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. 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. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 4.5%. 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.

Shoei Foods Has A Solid Track Record

The company has an extended history of paying stable dividends. 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.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, Shoei Foods has only grown its earnings per share at 3.8% per annum over the past five years. If Shoei Foods is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

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. We don't think Shoei Foods is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Shoei Foods stock. Is Shoei Foods not quite the opportunity you were looking for? Why not check out our selection of top 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.