Sun Frontier Fudousan's (TSE:8934) Shareholders Will Receive A Bigger Dividend Than Last Year

Sun Frontier Fudousan Co., Ltd. (TSE:8934) will increase its dividend from last year's comparable payment on the 28th of June to ¥30.00. This makes the dividend yield 3.6%, which is above the industry average.

Check out our latest analysis for Sun Frontier Fudousan

Sun Frontier Fudousan's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Sun Frontier Fudousan's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 20.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ¥8.50, compared to the most recent full-year payment of ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% 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 May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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.

Sun Frontier Fudousan Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Sun Frontier Fudousan management tenure, salary, and performance. 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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