Fuji (TSE:8860) Has Affirmed Its Dividend Of ¥13.00

The board of Fuji Corporation Limited (TSE:8860) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥13.00 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Fuji

Fuji's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Fuji is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Unless the company can turn things around, EPS could fall by 5.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Fuji Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥26.00, compared to the most recent full-year payment of ¥27.00. Its dividends have grown at less than 1% per annum over this time frame. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Fuji's EPS has declined at around 5.4% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Fuji you should be aware of, and 2 of them make us uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.