Readers hoping to buy Fast Fitness Japan Co., Ltd. (TSE:7092) for its dividend should act soon as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the company’s record date (the date the company determines which shareholders are eligible to receive a dividend). It is important to note the ex-dividend date as all transactions in the stock must have settled on or before the record date. This means that investors who buy Fast Fitness Japan shares on or after the 27th of September will not be able to receive the dividend paid on the 4th of December.
The company’s next dividend will be ¥15.00 per share and in the last 12 months the company paid a total of ¥33.00 per share. Based on last year’s payments, Fast Fitness Japan has a dividend yield of 2.5% on the current share price of ¥1,320.00. While it’s nice to see a company pay a dividend, it’s also important to ensure that you’re not killing the golden eggs by laying them. Therefore, we need to check whether dividends are being paid and if earnings are growing.
Check out our latest analysis for Fast Fitness Japan
Dividends are typically paid out of company profits. If a company’s dividends are higher than its profits, the dividend may be unsustainable. Fast Fitness Japan paid out 48% of its profits in dividends last year. A useful secondary check is also to evaluate whether Fast Fitness Japan generated enough free cash flow to pay its dividend. On a positive note, the dividend is well covered by free cash flow, with the company paying out 17% of its cash flow last year.
It’s encouraging to see that the dividend is covered by both profits and cash flow, as this generally suggests the dividend is sustainable, as long as earnings don’t fall precipitously.
You can click here to see how much of its profit Fast Fitness Japan paid out over the last 12 months.
TSE:7092 September 23, 2024 Highest dividend ever
Are profits and dividends increasing?
Stocks in companies that generate sustainable earnings growth often have the best dividend prospects, as they are more likely to raise dividends when earnings are rising. Because investors love dividends, they must be prepared for a large sell-off of shares at the same time if earnings fall and dividends are cut. With that in mind, Fast Fitness Japan’s steady growth, which has seen earnings per share increase by an average of 7.7% over the past five years, is encouraging. Management reinvests more than half of the company’s profits within the business, allowing the company to grow earnings with this retained capital. This is generally considered an attractive combination, as dividends can be increased over time through a combination of earnings growth and rising dividend payout ratios.
Another key way to gauge a company’s dividend prospects is to look at the historical rate of dividend growth. Fast Fitness Japan has achieved an average annual dividend growth of 37% based on the past three years of dividend payments. It’s good to see dividends growing alongside profits over several years, which could be a sign that the company intends to share in the growth with shareholders.
summary
From a dividend perspective, should investors buy or avoid Fast Fitness Japan? Earnings per share have been growing modestly and Fast Fitness Japan is paying out less than half of its earnings and cash flow as dividends. This suggests the company is investing in growth, which is an attractive combination. While faster earnings growth would be preferable, the best dividend stocks over the long term typically combine strong earnings per share growth with low dividend payout ratios, and Fast Fitness Japan falls somewhere in between. Overall, we think this is an attractive combination and one that’s worth investigating further.
With that in mind, Fast Fitness Japan’s dividend is attractive, but it’s worth knowing about the risks associated with this stock. Every company has risks, and we’ve spotted 2 warning signs for Fast Fitness Japan you should know about.
Generally speaking, we don’t recommend just buying the first dividend stock you see, so here we present a curated list of interesting stocks with high dividends.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
