Shinnihonseiyaku Co., Ltd. (TSE:4931) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of December to ¥45.00. This makes the dividend yield about the same as the industry average at 1.8%.
View our latest analysis for Shinnihonseiyaku
Shinnihonseiyaku's Future Dividend Projections Appear Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Shinnihonseiyaku was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 5.1% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.
Shinnihonseiyaku Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from ¥28.00 total annually to ¥35.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Shinnihonseiyaku to be a consistent dividend paying 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. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Shinnihonseiyaku has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Shinnihonseiyaku's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so 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. As an example, we've identified 1 warning sign for Shinnihonseiyaku that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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:4931
Shinnihonseiyaku
Provides cosmetics, pharmaceuticals, and health food in Japan and internationally.
Flawless balance sheet and undervalued.
