Shinko Shoji's (TSE:8141) Dividend Is Being Reduced To ¥7.50

Shinko Shoji Co., Ltd. (TSE:8141) has announced that on 11th of December, it will be paying a dividend of¥7.50, which a reduction from last year's comparable dividend. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Shinko Shoji

Shinko Shoji's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Shinko Shoji's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 21.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥15.00 total annually to ¥15.50. Dividend payments have been growing, but very slowly over the 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.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Shinko Shoji has grown earnings per share at 22% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Shinko Shoji's Dividend

Overall, we think that Shinko Shoji could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Shinko Shoji that investors should know about before committing capital to this stock. Is Shinko Shoji 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.

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