Chubu Electric Power Company (TSE:9502) Is Increasing Its Dividend To ¥35.00

Chubu Electric Power Company, Incorporated (TSE:9502) will increase its dividend from last year's comparable payment on the 1st of December to ¥35.00. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

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Chubu Electric Power Company's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Chubu Electric Power Company was paying a whopping 184% as a dividend, but this only made up 24% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 1.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

View our latest analysis for Chubu Electric Power Company

Chubu Electric Power Company Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Chubu Electric Power Company has impressed us by growing EPS at 12% per year over the past five years. Chubu Electric Power Company definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Chubu Electric Power Company's Dividend

Overall, we always like to see the dividend being raised, but we don't think Chubu Electric Power Company 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Chubu Electric Power Company has 3 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.