Shiseido Company, Limited (TSE:4911) will pay a dividend of ¥30.00 on the 27th of March. This payment means that the dividend yield will be 2.2%, which is around the industry average.
See our latest analysis for Shiseido Company
Shiseido Company's Future Dividends May Potentially Be At Risk
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 1,207% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
The next 12 months is set to see EPS grow by 46.6%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥60.00. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 51% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Shiseido Company's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Shiseido Company make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Shiseido Company has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Shiseido Company 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.
About TSE:4911
Shiseido Company
Engages in the production and sale of cosmetics in Japan and internationally.
Undervalued with reasonable growth potential.
