Fujicco (TSE:2908) Has Announced A Dividend Of ¥23.00

The board of Fujicco Co., Ltd. (TSE:2908) has announced that it will pay a dividend on the 2nd of June, with investors receiving ¥23.00 per share. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

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Estimates Indicate Fujicco's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 15.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 122%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for Fujicco

Fujicco Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥32.00 total annually to ¥46.00. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Fujicco's earnings per share has shrunk at 16% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fujicco's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Fujicco you should be aware of, and 2 of them are concerning. 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.