First BrothersLtd (TSE:3454) Has Announced That It Will Be Increasing Its Dividend To ¥34.00

The board of First Brothers Co.,Ltd. (TSE:3454) has announced that it will be paying its dividend of ¥34.00 on the 8th of February, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

View our latest analysis for First BrothersLtd

First BrothersLtd'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. But before making this announcement, First BrothersLtd's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 76% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

EPS is set to grow by 0.9% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.

First BrothersLtd Is Still Building Its Track Record

It is great to see that First BrothersLtd has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ¥15.00 in 2017 to the most recent total annual payment of ¥67.00. This means that it has been growing its distributions at 24% per annum over that time. First BrothersLtd has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

First BrothersLtd May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, First BrothersLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think First BrothersLtd will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments First BrothersLtd has been making. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, First BrothersLtd has 3 warning signs (and 1 which is significant) we think you should know about. Is First BrothersLtd 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.

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