Stock Analysis

Fuji Pharma (TSE:4554) Will Pay A Larger Dividend Than Last Year At ¥22.50

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The board of Fuji Pharma Co., Ltd. (TSE:4554) has announced that it will be paying its dividend of ¥22.50 on the 23rd of December, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.7%, which is in line with the average for the industry.

See our latest analysis for Fuji Pharma

Fuji Pharma's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Fuji Pharma is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to fall by 27.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 25%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

TSE:4554 Historic Dividend May 13th 2024

Fuji Pharma Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥22.00 total annually to ¥42.50. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Fuji Pharma has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Fuji Pharma's prospects of growing its dividend payments in the future.

Our Thoughts On Fuji Pharma's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Fuji Pharma (2 are potentially serious!) that you should be aware of before investing. Is Fuji Pharma not quite the opportunity you were looking for? Why not check out 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.