Tohoku Electric Power Company (TSE:9506) Has Announced A Dividend Of ¥15.00

The board of Tohoku Electric Power Company, Incorporated (TSE:9506) has announced that it will pay a dividend on the 27th of June, with investors receiving ¥15.00 per share. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

Check out our latest analysis for Tohoku Electric Power Company

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Tohoku Electric Power Company was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 5.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 9.2%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥5.00 in 2014, and the most recent fiscal year payment was ¥30.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Tohoku Electric Power Company has seen EPS rising for the last five years, at 24% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Tohoku Electric Power Company's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Tohoku Electric Power Company (2 are a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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