Chubu Electric Power Company (TSE:9502) Will Pay A Larger Dividend Than Last Year At ¥35.00

The board of Chubu Electric Power Company, Incorporated (TSE:9502) has announced that it will be paying its dividend of ¥35.00 on the 1st of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Chubu Electric Power Company was paying only paying out a fraction of earnings, but the payment was a massive 184% of cash flows. 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.

The next year is set to see EPS grow by 2.2%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Chubu Electric Power Company

Chubu Electric Power Company Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥10.00 in 2015, and the most recent fiscal year payment was ¥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. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Chubu Electric Power Company's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Chubu Electric Power Company's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Chubu Electric Power Company has 3 warning signs (and 1 which is a bit 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.