Odakyu Electric Railway (TSE:9007) Will Pay A Dividend Of ¥11.00

Odakyu Electric Railway Co., Ltd. (TSE:9007) will pay a dividend of ¥11.00 on the 1st of July. This means that the annual payment will be 1.0% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Odakyu Electric Railway

Odakyu Electric Railway's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, based ont he last payment, Odakyu Electric Railway was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to fall by 29.3%. If the dividend continues along recent trends, we estimate the payout ratio could be 18%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥22.00. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. We are encouraged to see that Odakyu Electric Railway has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Odakyu Electric Railway's prospects of growing its dividend payments in the future.

Our Thoughts On Odakyu Electric Railway's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Odakyu Electric Railway is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Odakyu Electric Railway is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Odakyu Electric Railway has 3 warning signs (and 2 which are a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.