Is It Worth Considering Fujikura Kasei Co., Ltd. (TSE:4620) For Its Upcoming Dividend?

Fujikura Kasei Co., Ltd. (TSE:4620) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Fujikura Kasei's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is JP¥9.00 a share, following on from the last 12 months, when the company distributed a total of JP¥18.00 per share to shareholders. Calculating the last year's worth of payments shows that Fujikura Kasei has a trailing yield of 3.7% on the current share price of JP¥482.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Fujikura Kasei

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Fujikura Kasei's payout ratio is modest, at just 36% of profit. A useful secondary check can be to evaluate whether Fujikura Kasei generated enough free cash flow to afford its dividend. It distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Fujikura Kasei paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Fujikura Kasei's 7.0% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Fujikura Kasei has delivered an average of 2.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Has Fujikura Kasei got what it takes to maintain its dividend payments? Fujikura Kasei has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Fujikura Kasei has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with Fujikura Kasei (at least 1 which is a bit concerning), and understanding these should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking 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.