Sanyo Electric RailwayLtd (TSE:9052) Has Affirmed Its Dividend Of ¥15.00

The board of Sanyo Electric Railway Co.,Ltd. (TSE:9052) has announced that it will pay a dividend of ¥15.00 per share on the 9th of December. This means that the annual payment will be 1.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Sanyo Electric RailwayLtd

Sanyo Electric RailwayLtd's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Sanyo Electric RailwayLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 6.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥20.00 total annually to ¥30.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Sanyo Electric RailwayLtd's Dividend Growing

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. Sanyo Electric RailwayLtd has seen EPS rising for the last five years, at 6.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Sanyo Electric RailwayLtd's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sanyo Electric RailwayLtd's payments, as there could be some issues with sustaining them into the future. While Sanyo Electric RailwayLtd is earning enough to cover the payments, the cash flows are lacking. 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. As an example, we've identified 1 warning sign for Sanyo Electric RailwayLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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