Fuji Nihon Seito (TSE:2114) Has Affirmed Its Dividend Of ¥15.00

Fuji Nihon Seito Corporation (TSE:2114) has announced that it will pay a dividend of ¥15.00 per share on the 4th of December. Based on this payment, the dividend yield on the company's stock will be 3.1%, which is an attractive boost to shareholder returns.

See our latest analysis for Fuji Nihon Seito

Fuji Nihon Seito's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Fuji Nihon Seito's dividend was only 36% of earnings, however it was paying out 132% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 47.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Fuji Nihon Seito Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥9.00 total annually to ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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. We are encouraged to see that Fuji Nihon Seito has grown earnings per share at 47% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Fuji Nihon Seito's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 1 warning sign for Fuji Nihon Seito that investors need to be conscious of moving forward. 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.

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