Fenwal Controls of Japan (TSE:6870) Has Announced A Dividend Of ¥37.00

The board of Fenwal Controls of Japan, Ltd. (TSE:6870) has announced that it will pay a dividend of ¥37.00 per share on the 31st of March. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

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Fenwal Controls of Japan's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Fenwal Controls of Japan was paying a whopping 638% as a dividend, but this only made up 32% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 6.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

See 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 works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Fenwal Controls of Japan Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Fenwal Controls of Japan has grown earnings per share at 6.7% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 3 warning signs for Fenwal Controls of Japan that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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