Tohoku Electric Power Company, Incorporated (TSE:9506) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Tohoku Electric Power Company, Incorporated (TSE:9506) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Tohoku Electric Power Company's shares before the 27th of September in order to receive the dividend, which the company will pay on the 2nd of December.

The company's next dividend payment will be JP¥15.00 per share, on the back of last year when the company paid a total of JP¥30.00 to shareholders. Based on the last year's worth of payments, Tohoku Electric Power Company stock has a trailing yield of around 2.2% on the current share price of JP¥1381.00. If you buy this business for its dividend, you should have an idea of whether Tohoku Electric Power Company's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Tohoku Electric Power Company

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tohoku Electric Power Company is paying out just 3.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 2.8% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Tohoku Electric Power Company's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Tohoku Electric Power Company's earnings have been skyrocketing, up 35% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Tohoku Electric Power Company looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Tohoku Electric Power Company has lifted its dividend by approximately 20% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Tohoku Electric Power Company an attractive dividend stock, or better left on the shelf? It's great that Tohoku Electric Power Company is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Tohoku Electric Power Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Tohoku Electric Power Company for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Tohoku Electric Power Company (2 don't sit too well with us) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.