Foster Electric Company's (TSE:6794) Upcoming Dividend Will Be Larger Than Last Year's

The board of Foster Electric Company, Limited (TSE:6794) has announced that it will be paying its dividend of ¥30.00 on the 27th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Foster Electric Company

Foster Electric Company's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Foster Electric Company was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 6.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Foster Electric Company has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Foster Electric Company's prospects of growing its dividend payments in the future.

We Really Like Foster Electric Company's Dividend

Overall, a dividend increase is always good, and we think that Foster Electric Company is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. 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 Foster Electric Company that investors should take into consideration. Is Foster Electric Company 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.