Sun Frontier Fudousan (TSE:8934) Is Due To Pay A Dividend Of ¥33.00

The board of Sun Frontier Fudousan Co., Ltd. (TSE:8934) has announced that it will pay a dividend of ¥33.00 per share on the 26th of June. This makes the dividend yield 3.5%, which is above the industry average.

Check out our latest analysis for Sun Frontier Fudousan

Sun Frontier Fudousan's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Sun Frontier Fudousan is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 36.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Sun Frontier Fudousan Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥11.50, compared to the most recent full-year payment of ¥66.00. This means that it has been growing its distributions at 19% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Sun Frontier Fudousan has seen earnings per share falling at 5.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Sun Frontier Fudousan's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Sun Frontier Fudousan is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Sun Frontier Fudousan (2 are a bit concerning!) that you should be aware of before investing. 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.