Fukuoka Financial Group's (TSE:8354) Shareholders Will Receive A Bigger Dividend Than Last Year

Fukuoka Financial Group, Inc.'s (TSE:8354) dividend will be increasing from last year's payment of the same period to ¥65.00 on 9th of December. This takes the annual payment to 3.4% of the current stock price, which is about average for the industry.

View our latest analysis for Fukuoka Financial Group

Fukuoka Financial Group's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Fukuoka Financial Group has established itself as a dividend paying company with over 10 years history of distributing 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.

The next year is set to see EPS grow by 10.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 36% by next year, which is in a pretty sustainable range.

Fukuoka Financial Group 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 ¥55.00 in 2014 to the most recent total annual payment of ¥130.00. This means that it has been growing its distributions at 9.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Fukuoka Financial Group's earnings per share has shrunk at 19% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Fukuoka Financial Group 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.