Founder's Consultants Holdings' (TSE:6542) Dividend Is Being Reduced To ¥25.00

Founder's Consultants Holdings Inc. (TSE:6542) has announced that on 30th of September, it will be paying a dividend of¥25.00, which a reduction from last year's comparable dividend. The yield is still above the industry average at 2.3%.

See our latest analysis for Founder's Consultants Holdings

Founder's Consultants Holdings' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Founder's Consultants Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 5.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Founder's Consultants Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 7 years was ¥12.42 in 2017, and the most recent fiscal year payment was ¥20.00. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Founder's Consultants Holdings has grown earnings per share at 5.6% per year over the past five years. Founder's Consultants Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Founder's Consultants Holdings' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Founder's Consultants Holdings that investors need to be conscious of moving forward. Is Founder's Consultants Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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