Fukuyama Transporting's (TSE:9075) Upcoming Dividend Will Be Larger Than Last Year's

Fukuyama Transporting Co., Ltd. (TSE:9075) will increase 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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Fukuyama Transporting is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 8.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

View 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 means that it has been growing its distributions at 4.3% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Fukuyama Transporting's earnings per share has fallen at approximately 4.7% per year over the past five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Fukuyama Transporting that investors should know about before committing capital to this stock. 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.