Shin-Etsu PolymerLtd (TSE:7970) Has Announced That It Will Be Increasing Its Dividend To ¥28.00

Shin-Etsu Polymer Co.,Ltd. (TSE:7970) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of November to ¥28.00. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.

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Shin-Etsu PolymerLtd's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by Shin-Etsu PolymerLtd's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 8.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Shin-Etsu PolymerLtd

Shin-Etsu PolymerLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥9.00 in 2015, and the most recent fiscal year payment was ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Shin-Etsu PolymerLtd has seen EPS rising for the last five years, at 11% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Shin-Etsu PolymerLtd management tenure, salary, and performance. 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.