Fuyo General Lease (TSE:8424) Is Due To Pay A Dividend Of ¥225.00

The board of Fuyo General Lease Co., Ltd. (TSE:8424) has announced that it will pay a dividend of ¥225.00 per share on the 9th of December. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Fuyo General Lease

Fuyo General Lease's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Fuyo General Lease was earning enough to cover the dividend, but free cash flows weren't positive. 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.

The next year is set to see EPS grow by 2.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Fuyo General Lease Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥74.00 in 2014, and the most recent fiscal year payment was ¥450.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend 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. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Fuyo General Lease's Dividend

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. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Fuyo General Lease has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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.

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