Fenwal Controls of Japan (TSE:6870) Has Affirmed Its Dividend Of ¥37.00

Fenwal Controls of Japan, Ltd. (TSE:6870) will pay a dividend of ¥37.00 on the 8th of September. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

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Fenwal Controls of Japan's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Fenwal Controls of Japan is earning enough to cover the payment, but then it makes up 141% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 17.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Fenwal Controls of Japan

Fenwal Controls of Japan 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. The annual payment during the last 10 years was ¥45.00 in 2015, and the most recent fiscal year payment was ¥74.00. This means that it has been growing its distributions at 5.1% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Fenwal Controls of Japan has seen EPS rising for the last five years, at 17% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Fenwal Controls of Japan that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.