Tokyo Energy & Systems' (TSE:1945) Upcoming Dividend Will Be Larger Than Last Year's

Tokyo Energy & Systems Inc. (TSE:1945) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥29.00. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

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Tokyo Energy & Systems' Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Tokyo Energy & Systems is earning enough to cover the payment, but then it makes up 2,235% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share could rise by 6.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Tokyo Energy & Systems

Tokyo Energy & Systems Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥58.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Tokyo Energy & Systems has seen EPS rising for the last five years, at 6.6% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Tokyo Energy & Systems' Dividend

Overall, we always like to see the dividend being raised, but we don't think Tokyo Energy & Systems will make a great income stock. While Tokyo Energy & Systems 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Tokyo Energy & Systems that investors need to be conscious of moving forward. Is Tokyo Energy & Systems 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.