Okinawa Cellular Telephone's (TSE:9436) Dividend Will Be ¥50.00

Okinawa Cellular Telephone Company (TSE:9436) has announced that it will pay a dividend of ¥50.00 per share on the 17th of June. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

View our latest analysis for Okinawa Cellular Telephone

Okinawa Cellular Telephone's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Okinawa Cellular Telephone's dividend was only 60% of earnings, however it was paying out 2,139% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 24.7%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Okinawa Cellular Telephone Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥39.50 in 2014 to the most recent total annual payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.7% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Okinawa Cellular Telephone has grown earnings per share at 7.5% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Okinawa Cellular Telephone is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Okinawa Cellular Telephone that investors should take into consideration. 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.