Bridgestone's (TSE:5108) Upcoming Dividend Will Be Larger Than Last Year's

Bridgestone Corporation (TSE:5108) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of September to ¥115.00. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

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Bridgestone's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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.

Looking forward, earnings per share is forecast to rise by 17.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

See our latest analysis for Bridgestone

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 ¥80.00, compared to the most recent full-year payment of ¥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 May Find It Hard To Grow The Dividend

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. Earnings per share has been crawling upwards at 2.7% per year. The company has been growing at a pretty soft 2.7% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 instance, we've picked out 1 warning sign 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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