Shikoku Electric Power Company (TSE:9507) Has Announced That It Will Be Increasing Its Dividend To ¥25.00

Shikoku Electric Power Company, Incorporated's (TSE:9507) dividend will be increasing from last year's payment of the same period to ¥25.00 on 1st of December. This makes the dividend yield 4.1%, which is above the industry average.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Shikoku 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 16.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 17%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Shikoku Electric Power Company

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥20.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Shikoku Electric Power Company has been growing its earnings per share at 30% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Shikoku Electric Power Company Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Shikoku Electric Power Company is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Shikoku Electric Power Company (of which 2 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.