Fukuyama Transporting (TSE:9075) Will Pay A Larger Dividend Than Last Year At ¥38.00

Fukuyama Transporting Co., Ltd. (TSE:9075) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of December to ¥38.00. This takes the dividend yield to 2.0%, which shareholders will be pleased with.

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Fukuyama Transporting's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Fukuyama Transporting's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 9.2%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Fukuyama Transporting

Fukuyama Transporting Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥50.00 in 2015 to the most recent total annual payment of ¥76.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Fukuyama Transporting has seen earnings per share falling at 4.7% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Fukuyama Transporting's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Fukuyama Transporting is earning enough to cover the payments, the cash flows are lacking. We don't think Fukuyama Transporting is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Fukuyama Transporting that investors need to be conscious of moving forward. Is Fukuyama Transporting 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.