SHIMAMURA (TSE:8227) Has Announced A Dividend Of ¥100.00

The board of SHIMAMURA Co., Ltd. (TSE:8227) has announced that it will pay a dividend of ¥100.00 per share on the 31st of October. This will take the dividend yield to an attractive 1.8%, providing a nice boost to shareholder returns.

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SHIMAMURA's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, SHIMAMURA'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 5.6%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for SHIMAMURA

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥95.00 total annually to ¥205.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that SHIMAMURA has grown earnings per share at 39% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like SHIMAMURA's Dividend

Overall, a dividend increase is always good, and we think that SHIMAMURA is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for SHIMAMURA that investors need to be conscious of moving forward. Is SHIMAMURA 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.