Fujiya (TSE:2211) Will Pay A Dividend Of ¥30.00

Fujiya Co., Ltd.'s (TSE:2211) investors are due to receive a payment of ¥30.00 per share on 25th of March. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.

View our latest analysis for Fujiya

Fujiya's Payment Could Potentially Have Solid Earnings Coverage

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. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS could expand by 8.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥15.00 total annually to ¥30.00. This means that it has been growing its distributions at 7.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Fujiya has been growing its earnings per share at 8.6% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Fujiya management tenure, salary, and performance. 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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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.