Keisei Electric Railway's (TSE:9009) Dividend Will Be ¥9.00

The board of Keisei Electric Railway Co., Ltd. (TSE:9009) has announced that it will pay a dividend of ¥9.00 per share on the 3rd of December. Based on this payment, the dividend yield will be 1.5%, which is fairly typical for the industry.

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

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Keisei Electric Railway's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to fall by 2.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 19%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Keisei Electric Railway

Keisei Electric Railway Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥4.00 in 2015, and the most recent fiscal year payment was ¥21.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Keisei Electric Railway has grown earnings per share at 73% per year over the past five years. 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 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. While Keisei Electric Railway is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 3 warning signs for Keisei Electric Railway (of which 2 are significant!) you should know about. Is Keisei Electric Railway not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.