Shionogi & Co., Ltd.'s (TSE:4507) investors are due to receive a payment of ¥85.00 per share on 2nd of December. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.
Check out our latest analysis for Shionogi
Shionogi's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Shionogi's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 1.3%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.
Shionogi Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥44.00 in 2014, and the most recent fiscal year payment was ¥170.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Shionogi Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Shionogi has grown earnings per share at 6.1% per year over the past five years. Shionogi definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Shionogi's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Shionogi that investors need to be conscious of moving forward. 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.
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About TSE:4507
Shionogi
Engages in the research, development, manufacture, and distribution of pharmaceuticals, diagnostic reagents, and medical devices in Japan.
Flawless balance sheet, undervalued and pays a dividend.
