Funai Soken Holdings (TSE:9757) Is Increasing Its Dividend To ¥43.00

Funai Soken Holdings Incorporated (TSE:9757) will increase its dividend from last year's comparable payment on the 31st of March to ¥43.00. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

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Funai Soken Holdings' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 82% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to grow by 18.7% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Funai Soken Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥18.89, compared to the most recent full-year payment of ¥86.00. This means that it has been growing its distributions at 16% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Funai Soken Holdings Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Funai Soken Holdings has been growing its earnings per share at 6.5% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Funai Soken Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Funai Soken Holdings that investors should know about before committing capital to this stock. Is Funai Soken Holdings 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.