Chugoku Electric Power (TSE:9504) Will Pay A Dividend Of ¥10.00

The Chugoku Electric Power Co., Inc.'s (TSE:9504) investors are due to receive a payment of ¥10.00 per share on 1st of December. The payment will take the dividend yield to 2.6%, which is in line with the average for the industry.

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Chugoku Electric Power's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Chugoku Electric Power is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 10.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 12%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Chugoku Electric Power

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥50.00 in 2015 to the most recent total annual payment of ¥21.00. Doing the maths, this is a decline of about 8.3% per year. 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.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Chugoku Electric Power hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Chugoku Electric Power could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Chugoku Electric Power's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Chugoku Electric Power is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Chugoku Electric Power (2 make us uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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