Bridgestone (TSE:5108) Will Pay A Dividend Of ¥105.00

The board of Bridgestone Corporation (TSE:5108) has announced that it will pay a dividend of ¥105.00 per share on the 27th of March. This takes the dividend yield to 3.7%, which shareholders will be pleased with.

Check out our latest analysis for Bridgestone

Bridgestone's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Bridgestone's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 9.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥54.00, compared to the most recent full-year payment of ¥210.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Bridgestone has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

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 Bridgestone has been growing its earnings per share at 6.2% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Bridgestone that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.