Fuso ChemicalLtd (TSE:4368) Is Due To Pay A Dividend Of ¥35.00

Fuso Chemical Co.,Ltd.'s (TSE:4368) investors are due to receive a payment of ¥35.00 per share on 24th of June. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

View our latest analysis for Fuso ChemicalLtd

Fuso ChemicalLtd's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Fuso ChemicalLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 3.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥6.00, compared to the most recent full-year payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. Fuso ChemicalLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Fuso ChemicalLtd has been growing its earnings per share at 13% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Fuso ChemicalLtd Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Fuso ChemicalLtd is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Fuso ChemicalLtd that investors should know about before committing capital to this stock. 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.