The board of Shizuoka Gas Co., Ltd. (TSE:9543) has announced that it will pay a dividend of ¥13.00 per share on the 2nd of September. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.
See our latest analysis for Shizuoka Gas
Shizuoka Gas' Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Shizuoka Gas' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to fall by 42.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 28%, which is comfortable for the company to continue in the future.
Shizuoka Gas Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥20.00. This means that it has been growing its distributions at 7.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Shizuoka Gas has grown earnings per share at 34% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Shizuoka Gas' Dividend
Overall, a dividend increase is always good, and we think that Shizuoka Gas is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Shizuoka Gas that investors should know about before committing capital to this stock. Is Shizuoka Gas 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.
About TSE:9543
6 star dividend payer with excellent balance sheet.
