Futaba Industrial (TSE:7241) Will Pay A Dividend Of ¥20.00

The board of Futaba Industrial Co., Ltd. (TSE:7241) has announced that it will pay a dividend on the 5th of June, with investors receiving ¥20.00 per share. The dividend yield of 3.8% is still a nice boost to shareholder returns, despite the cut.

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Futaba Industrial's 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. However, prior to this announcement, Futaba Industrial's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 14.1%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Futaba Industrial

Futaba Industrial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥3.00 in 2016 to the most recent total annual payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Futaba Industrial has seen EPS rising for the last five years, at 24% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Futaba Industrial Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Futaba Industrial does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Futaba Industrial stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.