FAN Communications (TSE:2461) Is Paying Out A Dividend Of ¥19.00

FAN Communications, Inc.'s (TSE:2461) investors are due to receive a payment of ¥19.00 per share on 27th of March. The dividend yield will be 5.2% based on this payment which is still above the industry average.

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FAN Communications' Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 140% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS is forecast to fall by 5.2%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 152%, which is definitely a bit high to be sustainable going forward.

View our latest analysis for FAN Communications

FAN Communications 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 annual payment during the last 10 years was ¥17.00 in 2015, and the most recent fiscal year payment was ¥27.00. This implies that the company grew its distributions at a yearly rate of about 4.7% over that duration. 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 Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. It's not great to see that FAN Communications' earnings per share has fallen at approximately 9.9% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

FAN Communications' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think FAN Communications 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for FAN Communications that you should be aware of before investing. 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.