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. The payment will take the dividend yield to 3.5%, which is in line with the average for the industry.

See our latest analysis for Fukuoka Financial Group

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

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

Fukuoka Financial Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Fukuoka Financial Group's payout ratio sits at 18%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to expand by 14.8%. If the dividend continues on this path, the future payout ratio could be 39% 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. Since 2015, the annual payment back then was ¥55.00, compared to the most recent full-year payment of ¥140.00. This means that it has been growing its distributions at 9.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. However, initial appearances might be deceiving. Over the past five years, it looks as though Fukuoka Financial Group's EPS has declined at around 18% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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

Overall, it's great to see the dividend being raised and that it is still 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 6 analysts we track are forecasting for the future. 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.