Fuji (TSE:8860) Will Pay A Dividend Of ¥16.00

The board of Fuji Corporation Limited (TSE:8860) has announced that it will pay a dividend on the 1st of December, with investors receiving ¥16.00 per share. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

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Fuji's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Fuji was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 13.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Fuji

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. The annual payment during the last 10 years was ¥26.00 in 2015, and the most recent fiscal year payment was ¥32.00. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Fuji has been growing its earnings per share at 14% a year over the past five years. Fuji definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Fuji's Dividend

Overall, we always like to see the dividend being raised, but we don't think Fuji will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. To that end, Fuji has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.