Sun Frontier Fudousan's (TSE:8934) Upcoming Dividend Will Be Larger Than Last Year's

Sun Frontier Fudousan Co., Ltd.'s (TSE:8934) dividend will be increasing from last year's payment of the same period to ¥30.00 on 28th of June. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Sun Frontier Fudousan

Sun Frontier Fudousan's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is 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 on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Sun Frontier Fudousan Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ¥8.50 total annually to ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Sun Frontier Fudousan May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Sun Frontier Fudousan's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Sun Frontier Fudousan has the option to increase the payout ratio to return more cash to shareholders.

We Really Like Sun Frontier Fudousan's Dividend

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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. 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.