Fujitsu General's (TSE:6755) Dividend Will Be Increased To ¥19.00

Fujitsu General Limited (TSE:6755) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of December to ¥19.00. Based on this payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.

Check out our latest analysis for Fujitsu General

Fujitsu General Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Fujitsu General's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share is forecast to rise by 27.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 107%, which probably can't continue without putting some pressure on the balance sheet.

Fujitsu General Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥12.00 total annually to ¥38.00. This means that it has been growing its distributions at 12% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Fujitsu General's EPS has fallen by approximately 19% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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

In summary, it's great to see that the company can raise the dividend and keep it 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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Fujitsu General that investors should take into consideration. Is Fujitsu General 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.

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