Tokyo Energy & Systems (TSE:1945) Will Pay A Dividend Of ¥26.00

Tokyo Energy & Systems Inc. (TSE:1945) has announced that it will pay a dividend of ¥26.00 per share on the 30th of June. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Tokyo Energy & Systems

Tokyo Energy & Systems' Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Tokyo Energy & Systems' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 12.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 112%, which could put the dividend in jeopardy if the company's earnings don't improve.

Tokyo Energy & Systems Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥52.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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 Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Tokyo Energy & Systems' EPS has declined at around 12% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Tokyo Energy & Systems has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.