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

The Chugoku Electric Power Co., Inc. (TSE:9504) will pay a dividend of ¥10.00 on the 1st of December. The payment will take the dividend yield to 2.4%, which is in line with the average for the industry.

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Chugoku Electric Power's Projected Earnings Seem Likely To Cover Future Distributions

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. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to fall by 11.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 12%, which is comfortable for the company to continue in the future.

Check out our latest analysis for Chugoku Electric Power

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥50.00 in 2015, and the most recent fiscal year payment was ¥21.00. Doing the maths, this is a decline of about 8.3% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Chugoku Electric Power hasn't seen much change in its earnings per share over the last five years. If Chugoku Electric Power is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Chugoku Electric Power you should be aware of, and 2 of them don't sit too well with us. 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.