Four Days Left Until Fuji Seal International, Inc. (TSE:7864) Trades Ex-Dividend
Fuji Seal International, Inc. (TSE:7864) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Fuji Seal International's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of December.
The company's upcoming dividend is JP¥43.00 a share, following on from the last 12 months, when the company distributed a total of JP¥87.00 per share to shareholders. Calculating the last year's worth of payments shows that Fuji Seal International has a trailing yield of 2.6% on the current share price of JP¥3400.00. If you buy this business for its dividend, you should have an idea of whether Fuji Seal International's dividend is reliable and sustainable. As a result, readers should always check whether Fuji Seal International has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fuji Seal International has a low and conservative payout ratio of just 20% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 124% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Fuji Seal International does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Fuji Seal International paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Fuji Seal International's ability to maintain its dividend.
See our latest analysis for Fuji Seal International
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Fuji Seal International has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fuji Seal International has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Fuji Seal International an attractive dividend stock, or better left on the shelf? We like that Fuji Seal International has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's hard to get excited about Fuji Seal International from a dividend perspective.
So while Fuji Seal International looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Fuji Seal International is showing 2 warning signs in our investment analysis, and 1 of those is concerning...
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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.