Tohoku Electric Power Company (TSE:9506) Will Pay A Larger Dividend Than Last Year At ¥20.00

The board of Tohoku Electric Power Company, Incorporated (TSE:9506) has announced that it will be paying its dividend of ¥20.00 on the 27th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.7%, which is in line with the average for the industry.

See our latest analysis for Tohoku Electric Power Company

Tohoku Electric Power Company's Payment Could Potentially Have Solid Earnings Coverage

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. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 2.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 11%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 2015, and the most recent fiscal year payment was ¥30.00. This means that it has been growing its distributions at 20% per annum over that time. Tohoku Electric Power Company has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 impressed us by growing EPS at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Tohoku Electric Power Company Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Tohoku Electric Power Company you should be aware of, and 2 of them can't be ignored. Is Tohoku Electric Power Company 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.