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 makes the dividend yield 2.2%, which is above the industry average.

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Fukuyama Transporting's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Fukuyama Transporting is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 6.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out 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 works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. However, Fukuyama Transporting's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Fukuyama Transporting's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Fukuyama Transporting's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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 Fukuyama Transporting 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.