Furuno Electric (TSE:6814) Is Due To Pay A Dividend Of ¥55.00

Furuno Electric Co., Ltd. (TSE:6814) will pay a dividend of ¥55.00 on the 13th of November. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

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 Furuno Electric's stock price has increased by 72% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Furuno Electric's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Furuno Electric's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 10.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Furuno Electric

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥8.00, compared to the most recent full-year payment of ¥110.00. This means that it has been growing its distributions at 30% per annum 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Furuno Electric has impressed us by growing EPS at 63% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Furuno Electric's Dividend

Overall, a dividend increase is always good, and we think that Furuno Electric is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, Furuno Electric has 3 warning signs (and 1 which is concerning) we think you should know about. Is Furuno Electric 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.