FukokuLtd (TSE:5185) Is Increasing Its Dividend To ¥42.50

The board of Fukoku Co.,Ltd. (TSE:5185) has announced that it will be paying its dividend of ¥42.50 on the 5th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.

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FukokuLtd'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. Based on the last payment, FukokuLtd was paying only paying out a fraction of earnings, but the payment was a massive 266% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 11.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for FukokuLtd

FukokuLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥20.00 in 2015 to the most recent total annual payment of ¥85.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that FukokuLtd has been growing its earnings per share at 58% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think FukokuLtd's payments are rock solid. While FukokuLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for FukokuLtd that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.