Sun Frontier Fudousan's (TSE:8934) Dividend Will Be ¥33.00

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 takes the dividend yield to 3.4%, which shareholders will be pleased with.

View our latest analysis for Sun Frontier Fudousan

Sun Frontier Fudousan's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Sun Frontier Fudousan's earnings easily covered the dividend, but free cash flows were negative. 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 could rise by 0.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Sun Frontier Fudousan Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥66.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Sun Frontier Fudousan's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Sun Frontier Fudousan could always pay out a higher proportion of earnings to increase shareholder returns.

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.

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. Just as an example, we've come across 2 warning signs for Sun Frontier Fudousan you should be aware of, and 1 of them is significant. 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.