Fibergate's (TSE:9450) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Fibergate Inc. (TSE:9450) has announced that it will be paying its dividend of ¥13.50 on the 12th of March, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

Check out our latest analysis for Fibergate

Fibergate's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Fibergate was paying only paying out a fraction of earnings, but the payment was a massive 116% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 14.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Fibergate Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 4 years was ¥3.50 in 2020, and the most recent fiscal year payment was ¥27.00. This works out to be a compound annual growth rate (CAGR) of approximately 67% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Fibergate has been growing its earnings per share at 22% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Fibergate's payments are rock solid. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Fibergate that investors should take into consideration. Is Fibergate not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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