Fujikura Kasei (TSE:4620) Is Increasing Its Dividend To ¥9.00

Fujikura Kasei Co., Ltd. (TSE:4620) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of December to ¥9.00. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

View our latest analysis for Fujikura Kasei

Fujikura Kasei's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 93% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Unless the company can turn things around, EPS could fall by 11.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 55%, which is an improvement from where it is currently.

Fujikura Kasei Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥14.00 total annually to ¥18.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Fujikura Kasei's Dividend

Overall, we always like to see the dividend being raised, but we don't think Fujikura Kasei will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Fujikura Kasei is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 identified 3 warning signs for Fujikura Kasei (1 is a bit unpleasant!) that you should be aware of before investing. Is Fujikura Kasei not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com