Fast Fitness Japan (TSE:7092) Has Announced A Dividend Of ¥25.00

The board of Fast Fitness Japan Incorporated (TSE:7092) has announced that it will pay a dividend of ¥25.00 per share on the 27th of June. The dividend yield of 3.1% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Fast Fitness Japan

Fast Fitness Japan'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 dividend, Fast Fitness Japan is earning enough to cover the payment, but then it makes up 112% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 14.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.

Fast Fitness Japan's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the annual payment back then was ¥12.82, compared to the most recent full-year payment of ¥45.00. This means that it has been growing its distributions at 37% per annum over that time. Fast Fitness Japan has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Fast Fitness Japan's earnings per share has shrunk at approximately 4.2% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Fast Fitness Japan that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.