Fuyo General Lease (TSE:8424) Has Announced A Dividend Of ¥225.00

The board of Fuyo General Lease Co., Ltd. (TSE:8424) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥225.00 per share. This makes the dividend yield 4.2%, which is above the industry average.

View our latest analysis for Fuyo General Lease

Fuyo General Lease's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Fuyo General Lease's earnings easily covered the dividend, but free cash flows were negative. 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.

Over the next year, EPS is forecast to expand by 2.4%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Fuyo General Lease Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥74.00 in 2014, and the most recent fiscal year payment was ¥450.00. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Fuyo General Lease has been growing its earnings per share at 13% a year over the past five years. Fuyo General Lease definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fuyo General Lease will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Fuyo General Lease (1 is significant!) that you should be aware of before investing. Is Fuyo General Lease 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.