FukokuLtd (TSE:5185) Is Due To Pay A Dividend Of ¥37.50

Fukoku Co.,Ltd. (TSE:5185) has announced that it will pay a dividend of ¥37.50 per share on the 11th of June. This takes the dividend yield to 4.4%, which shareholders will be pleased with.

See our latest analysis for FukokuLtd

FukokuLtd's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. But before making this announcement, FukokuLtd's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 9.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

FukokuLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥75.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. FukokuLtd has impressed us by growing EPS at 48% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for FukokuLtd that investors should know about before committing capital to this stock. 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.