Sanyo Electric RailwayLtd (TSE:9052) Is Paying Out A 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.

Check out our latest analysis for Sanyo Electric RailwayLtd

Sanyo Electric RailwayLtd's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Sanyo Electric RailwayLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 6.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥30.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

We Could See Sanyo Electric RailwayLtd's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Sanyo Electric RailwayLtd has grown earnings per share at 6.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Sanyo Electric RailwayLtd's Dividend

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 probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Sanyo Electric RailwayLtd that investors should know about before committing capital to this stock. Is Sanyo Electric RailwayLtd 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.

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