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

The board of Fukuoka Financial Group, Inc. (TSE:8354) has announced that it will be paying its dividend of ¥70.00 on the 30th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.1%.

See our latest analysis for Fukuoka Financial Group

Fukuoka Financial Group's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

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 10.9%. 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥55.00, compared to the most recent full-year payment of ¥130.00. This implies that the company grew its distributions at a yearly rate of about 9.0% over that duration. 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.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Fukuoka Financial Group's EPS has declined at around 16% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 1 warning sign for Fukuoka Financial Group that you should be aware of before investing. 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.