Chugoku Electric Power (TSE:9504) Is Due To Pay A Dividend Of ¥10.00

The Chugoku Electric Power Co., Inc. (TSE:9504) has announced that it will pay a dividend of ¥10.00 per share on the 1st of December. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

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Chugoku Electric Power's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Chugoku Electric Power's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to fall by 10.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 12%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Chugoku Electric Power

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥21.00. The dividend has shrunk at around 8.3% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Although it's important to note that Chugoku Electric Power's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Chugoku Electric Power has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Chugoku Electric Power's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Chugoku Electric Power's payments are rock solid. While Chugoku Electric Power is earning enough to cover the payments, the cash flows are lacking. We don't think Chugoku Electric Power is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Chugoku Electric Power has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is Chugoku Electric Power 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.