Keisei Electric Railway (TSE:9009) Is Due To Pay A Dividend Of ¥9.00

The board of Keisei Electric Railway Co., Ltd. (TSE:9009) has announced that it will pay a dividend on the 3rd of December, with investors receiving ¥9.00 per share. This means the annual payment is 1.7% of the current stock price, which is above the average for the industry.

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Keisei Electric Railway's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Keisei Electric Railway's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 3.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 19%, which is comfortable for the company to continue in the future.

See our latest analysis for Keisei Electric Railway

Keisei Electric Railway Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥4.00, compared to the most recent full-year payment of ¥21.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Keisei Electric Railway has grown earnings per share at 20% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Keisei Electric Railway's prospects of growing its dividend payments in the future.

Our Thoughts On Keisei Electric Railway's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Keisei Electric Railway's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Keisei Electric Railway has 3 warning signs (and 2 which make us uncomfortable) 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.