Fuji Nihon (TSE:2114) Has Announced A Dividend Of ¥17.00

The board of Fuji Nihon Corporation (TSE:2114) has announced that it will pay a dividend on the 10th of June, with investors receiving ¥17.00 per share. The dividend yield will be 3.2% based on this payment which is still above the industry average.

See our latest analysis for Fuji Nihon

Fuji Nihon's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Fuji Nihon's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 16.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥9.00 in 2015, and the most recent fiscal year payment was ¥32.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Fuji Nihon has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Fuji Nihon's prospects of growing its dividend payments in the future.

We Really Like Fuji Nihon's Dividend

Overall, we like to see the dividend staying consistent, and we think Fuji Nihon might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Fuji Nihon that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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