Fujikura Kasei (TSE:4620) Will Pay A Dividend Of ¥9.00

Fujikura Kasei Co., Ltd. (TSE:4620) has announced that it will pay a dividend of ¥9.00 per share on the 27th of June. This will take the annual payment to 3.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Fujikura Kasei

Fujikura Kasei's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Fujikura Kasei was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 3.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Fujikura Kasei 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 dividend has gone from an annual total of ¥14.00 in 2014 to the most recent total annual payment of ¥18.00. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Fujikura Kasei May Find It Hard To Grow The Dividend

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. Fujikura Kasei has seen earnings per share falling at 3.8% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Fujikura Kasei has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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