Fujiya's (TSE:2211) Dividend Will Be ¥30.00

Fujiya Co., Ltd.'s (TSE:2211) investors are due to receive a payment of ¥30.00 per share on 26th of March. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

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Fujiya's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Fujiya was earning enough to cover the dividend, but it wasn't generating any free cash flows. 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 could expand by 8.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Fujiya

Fujiya Is Still Building Its Track Record

Fujiya's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the dividend has gone from ¥10.00 total annually to ¥30.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

We Could See Fujiya's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Fujiya has been growing its earnings per share at 8.8% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Fujiya's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fujiya's payments, as there could be some issues with sustaining them into the future. While Fujiya is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 1 warning sign for Fujiya that investors need to be conscious of moving forward. 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.