Sun Frontier Fudousan (TSE:8934) Has Announced That It Will Be Increasing Its Dividend To ¥38.00

Sun Frontier Fudousan Co., Ltd. (TSE:8934) will increase its dividend from last year's comparable payment on the 3rd of December to ¥38.00. This takes the dividend yield to 3.7%, which shareholders will be pleased with.

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Sun Frontier Fudousan's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Sun Frontier Fudousan 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.

If the trend of the last few years continues, EPS will grow by 5.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Sun Frontier Fudousan

Sun Frontier Fudousan Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥14.00 in 2015 to the most recent total annual payment of ¥76.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Sun Frontier Fudousan Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Sun Frontier Fudousan has impressed us by growing EPS at 5.9% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Sun Frontier Fudousan's prospects of growing its dividend payments in the future.

In Summary

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. We don't think Sun Frontier Fudousan 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. Case in point: We've spotted 2 warning signs for Sun Frontier Fudousan (of which 1 is concerning!) you should know about. Is Sun Frontier Fudousan 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.