Shinko Shoji (TSE:8141) Will Pay A Dividend Of ¥8.00

Shinko Shoji Co., Ltd.'s (TSE:8141) investors are due to receive a payment of ¥8.00 per share on 17th of June. However, the dividend yield of 1.7% still remains in a typical range for the industry.

Check out our latest analysis for Shinko Shoji

Shinko Shoji's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Shinko Shoji was paying out 95% of earnings, but a comparatively small 2.3% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS could expand by 8.2% if recent trends continue. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 47% which would be quite comfortable going to take the dividend forward.

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 ¥15.00 total annually to ¥15.50. Dividend payments have grown at less than 1% a year over this period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Shinko Shoji's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Shinko Shoji has been growing its earnings per share at 8.2% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Shinko Shoji that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.