Fuji Nihon (TSE:2114) Will Pay A Dividend Of ¥17.00

Fuji Nihon Corporation (TSE:2114) will pay a dividend of ¥17.00 on the 10th of June. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

See our latest analysis for Fuji Nihon

Fuji Nihon's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

Looking forward, earnings per share could rise by 16.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥9.00 total annually to ¥32.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Fuji Nihon has grown earnings per share at 16% per year over the past five years. Fuji Nihon definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Fuji Nihon's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Fuji Nihon that investors should take into consideration. Is Fuji Nihon 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.