Fuji Pharma (TSE:4554) Has Announced That It Will Be Increasing Its Dividend To ¥22.50

The board of Fuji Pharma Co., Ltd. (TSE:4554) has announced that the dividend on 23rd of December will be increased to ¥22.50, which will be 13% higher than last year's payment of ¥20.00 which covered the same period. This makes the dividend yield about the same as the industry average at 2.7%.

Check out our latest analysis for Fuji Pharma

Fuji Pharma's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Fuji Pharma is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to fall by 29.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Fuji Pharma Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥22.00 in 2014, and the most recent fiscal year payment was ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Fuji Pharma has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Fuji Pharma's payments are rock solid. While Fuji Pharma is earning enough to cover the payments, the cash flows are lacking. We don't think Fuji Pharma is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Fuji Pharma has 4 warning signs (and 2 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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