The board of Focus Systems Corporation (TSE:4662) has announced that it will pay a dividend of ¥10.00 per share on the 9th of December. This makes the dividend yield 3.5%, which is above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Focus Systems' stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Focus Systems' Future Dividend Projections Appear Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Focus Systems' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 2.2% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Focus Systems
Focus Systems' Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was ¥20.00 in 2021, and the most recent fiscal year payment was ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Focus Systems May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 2.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Focus Systems' Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Focus Systems that investors need to be conscious of moving forward. Is Focus Systems 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.