Fukuyama Transporting's (TSE:9075) Dividend Will Be Increased To ¥38.00

Fukuyama Transporting Co., Ltd.'s (TSE:9075) dividend will be increasing from last year's payment of the same period to ¥38.00 on 3rd of December. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

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Fukuyama Transporting'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. 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.

Over the next year, EPS is forecast to expand by 8.6%. 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 Fukuyama Transporting

Fukuyama Transporting Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥50.00 total annually to ¥76.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. 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.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Fukuyama Transporting's EPS has declined at around 4.7% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Fukuyama Transporting's Dividend

Overall, we always like to see the dividend being raised, but we don't think Fukuyama Transporting will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Fukuyama Transporting is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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.