Fujicco (TSE:2908) Will Pay A Dividend Of ¥23.00

The board of Fujicco Co., Ltd. (TSE:2908) has announced that it will pay a dividend on the 6th of June, with investors receiving ¥23.00 per share. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Fujicco

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Fujicco's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 9.1%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 138%, which probably can't continue without putting some pressure on the balance sheet.

Fujicco Has A Solid Track Record

The company has an extended history of paying stable dividends. 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. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 24% over the last 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. 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.

Our Thoughts On Fujicco's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Fujicco is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Fujicco that investors need to be conscious of moving forward. Is Fujicco 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.