ShinMaywa Industries (TSE:7224) Will Pay A Dividend Of ¥25.00

ShinMaywa Industries, Ltd. (TSE:7224) will pay a dividend of ¥25.00 on the 26th of June. This makes the dividend yield 3.5%, which is above the industry average.

View our latest analysis for ShinMaywa Industries

ShinMaywa Industries' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, ShinMaywa Industries was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 7.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥49.50. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See ShinMaywa Industries' 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 ShinMaywa Industries has been growing its earnings per share at 7.0% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ShinMaywa Industries' prospects of growing its dividend payments in the future.

Our Thoughts On ShinMaywa Industries' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for ShinMaywa Industries that investors should know about before committing capital to this stock. Is ShinMaywa Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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