Sanyo Electric RailwayLtd's (TSE:9052) Dividend Will Be ¥25.00

Sanyo Electric Railway Co.,Ltd. (TSE:9052) will pay a dividend of ¥25.00 on the 19th of June. This takes the dividend yield to 2.5%, which shareholders will be pleased with.

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Sanyo Electric RailwayLtd's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Sanyo Electric RailwayLtd was paying a whopping 594% as a dividend, but this only made up 24% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 27.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

See our latest analysis for Sanyo Electric RailwayLtd

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sanyo Electric RailwayLtd has been growing its earnings per share at 27% a 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

Overall, we always like to see the dividend being raised, but we don't think Sanyo Electric RailwayLtd will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 3 warning signs for Sanyo Electric RailwayLtd that investors should take into consideration. 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.