Bridgestone (TSE:5108) Will Pay A Dividend Of ¥115.00

Bridgestone Corporation (TSE:5108) has announced that it will pay a dividend of ¥115.00 per share on the 26th of March. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

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Bridgestone's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Bridgestone was paying out 75% of earnings, but a comparatively small 49% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 24.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Bridgestone

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥120.00 in 2015, and the most recent fiscal year payment was ¥230.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

We Could See Bridgestone's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Bridgestone has grown earnings per share at 7.6% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited 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. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Bridgestone that investors should take into consideration. Is Bridgestone not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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