First Juken's (TSE:8917) Dividend Will Be ¥21.00

First Juken Co., Ltd. (TSE:8917) has announced that it will pay a dividend of ¥21.00 per share on the 22nd of July. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

View our latest analysis for First Juken

First Juken's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, First Juken's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 0.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

First Juken Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. There hasn't been much of a change in the dividend over the last 6 years. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, First Juken's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, First Juken could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we think First Juken is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for First Juken (of which 1 shouldn't be ignored!) 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.

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.