Fujitec (TSE:6406) Is Due To Pay A Dividend Of ¥75.00

Fujitec Co., Ltd.'s (TSE:6406) investors are due to receive a payment of ¥75.00 per share on 2nd of December. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for Fujitec

Fujitec's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Fujitec's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to grow by 7.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥165.00. This means that it has been growing its distributions at 25% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Fujitec has seen EPS rising for the last five years, at 15% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Fujitec's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Fujitec that investors should know about before committing capital to this stock. 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.

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