Fujiya (TSE:2211) Is Paying Out A Dividend Of ¥30.00

The board of Fujiya Co., Ltd. (TSE:2211) has announced that it will pay a dividend of ¥30.00 per share on the 26th of March. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.

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Fujiya's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Fujiya's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share could rise by 13.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

See our latest analysis for Fujiya

Fujiya Is Still Building Its Track Record

Fujiya's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥30.00. This means that it has been growing its distributions at 13% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Fujiya has been growing its earnings per share at 13% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Fujiya's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Fujiya is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Fujiya that you should be aware of before investing. 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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