Tohoku Electric Power Company's (TSE:9506) Dividend Will Be ¥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. This makes the dividend yield about the same as the industry average at 2.5%.

Check out our latest analysis for Tohoku Electric Power Company

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Tohoku Electric Power Company was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 5.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 9.2%, which is comfortable for the company to continue in the future.

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 ¥5.00 in 2015 to the most recent total annual payment of ¥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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tohoku Electric Power Company has seen EPS rising for the last five years, at 24% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, Tohoku Electric Power Company has 4 warning signs (and 2 which are potentially serious) we think you should know about. 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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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.