Fukuda (TSE:1899) Is Increasing Its Dividend To ¥250.00

Fukuda Corporation (TSE:1899) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of March to ¥250.00. Based on this payment, the dividend yield for the company will be 3.3%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Fukuda's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Fukuda's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Fukuda is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 0.0002% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 39%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for Fukuda

Fukuda Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥45.00, compared to the most recent full-year payment of ¥250.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Fukuda's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Fukuda's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Fukuda's payments are rock solid. While Fukuda is earning enough to cover the payments, the cash flows are lacking. We don't think Fukuda is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Fukuda (1 makes us a bit uncomfortable!) 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.