Forval (TSE:8275) Has Announced That It Will Be Increasing Its Dividend To ¥30.00

Forval Corporation's (TSE:8275) dividend will be increasing from last year's payment of the same period to ¥30.00 on 5th of June. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

See our latest analysis for Forval

Forval's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Forval'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, EPS could fall by 5.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Forval Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥11.25 in 2015, and the most recent fiscal year payment was ¥30.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. 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.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Forval's EPS has declined at around 5.4% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Forval stock. Is Forval 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.