Fujitec's (TSE:6406) Dividend Will Be ¥75.00

The board of Fujitec Co., Ltd. (TSE:6406) has announced that it will pay a dividend of ¥75.00 per share on the 2nd of December. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

See our latest analysis for Fujitec

Fujitec's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Fujitec was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to grow by 7.5% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 89% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 works out to be a compound annual growth rate (CAGR) of approximately 25% a year 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Fujitec has seen EPS rising for the last five years, at 14% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Fujitec Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Fujitec is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Fujitec that you should be aware of before investing. Is Fujitec not quite the opportunity you were looking for? Why not check out our selection of top 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.