Odakyu Electric Railway (TSE:9007) Has Announced A Dividend Of ¥15.00

Odakyu Electric Railway Co., Ltd. (TSE:9007) will pay a dividend of ¥15.00 on the 2nd of December. This makes the dividend yield 2.0%, which is above the industry average.

Check out our latest analysis for Odakyu Electric Railway

Odakyu Electric Railway's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Odakyu Electric Railway's dividend was only 13% of earnings, however it was paying out 95% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to fall by 33.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 23%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥16.00 in 2014, and the most recent fiscal year payment was ¥30.00. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Odakyu Electric Railway has seen EPS rising for the last five years, at 20% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Odakyu Electric Railway's payments are rock solid. While Odakyu Electric Railway is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Odakyu Electric Railway (of which 2 shouldn't be ignored!) 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.

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