Shin Hai Gas Corporation's (TWSE:9926) investors are due to receive a payment of NT$2.00 per share on 12th of August. Based on this payment, the dividend yield on the company's stock will be 3.6%, which is an attractive boost to shareholder returns.
View our latest analysis for Shin Hai Gas
Shin Hai Gas' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Shin Hai Gas was paying out 78% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Over the next year, EPS could expand by 7.4% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 77%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
Shin Hai Gas Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was NT$1.07 in 2014, and the most recent fiscal year payment was NT$2.00. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See Shin Hai Gas' Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. Shin Hai Gas has seen EPS rising for the last five years, at 7.4% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shin Hai Gas' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
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. Now, if you want to look closer, it would be worth checking out our free research on Shin Hai Gas management tenure, salary, and performance. 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.
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About TWSE:9926
Flawless balance sheet with proven track record and pays a dividend.
