Bridgestone's (TSE:5108) Dividend Will Be ¥115.00

Bridgestone Corporation (TSE:5108) will pay a dividend of ¥115.00 on the 26th of March. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

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Bridgestone's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Bridgestone was paying out 75% of earnings, but a comparatively small 49% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 23.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 64% by next year, which is in a pretty sustainable range.

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. Since 2015, the dividend has gone from ¥80.00 total annually to ¥230.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Bridgestone Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bridgestone has seen EPS rising for the last five years, at 7.3% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Bridgestone's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Bridgestone that investors should take into consideration. 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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