Fujicco (TSE:2908) Is Due To Pay A Dividend Of ¥23.00

Fujicco Co., Ltd.'s (TSE:2908) investors are due to receive a payment of ¥23.00 per share on 9th of December. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

Check out our latest analysis for Fujicco

Fujicco Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 10.3%. If the dividend continues on its recent course, the payout ratio in 12 months could be 112%, which is a bit high and could start applying pressure to the balance sheet.

Fujicco Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥32.00 in 2014, and the most recent fiscal year payment was ¥46.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Fujicco's EPS has declined at around 23% a year. 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Fujicco that investors should know about before committing capital to this stock. 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.

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