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

Chubu Electric Power Company, Incorporated (TSE:9502) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of December to ¥35.00. This makes the dividend yield 3.4%, which is above the industry average.

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Chubu Electric Power Company'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, Chubu Electric Power Company was paying a whopping 184% 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.

Looking forward, earnings per share is forecast to rise by 2.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2015, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥70.00. This means that it has been growing its distributions at 21% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Chubu Electric Power Company has grown earnings per share at 12% 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.

In Summary

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. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Chubu Electric Power Company (1 is concerning!) that you should be aware of before investing. Is Chubu Electric Power Company 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.