Fukuoka Financial Group (TSE:8354) Will Pay A Larger Dividend Than Last Year At ¥70.00

Fukuoka Financial Group, Inc. (TSE:8354) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥70.00. This makes the dividend yield about the same as the industry average at 3.3%.

Check out our latest analysis for Fukuoka Financial Group

Fukuoka Financial Group's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having distributed dividends for at least 10 years, Fukuoka Financial Group has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 33%, which means that Fukuoka Financial Group would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 11.0%. If the dividend continues on this path, the future payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Fukuoka Financial Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥55.00 in 2014, and the most recent fiscal year payment was ¥130.00. This means that it has been growing its distributions at 9.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Fukuoka Financial Group's EPS has fallen by approximately 16% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Fukuoka Financial Group's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Fukuoka Financial Group that you should be aware of before investing. 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.