Shikoku Electric Power Company (TSE:9507) Will Pay A Larger Dividend Than Last Year At ¥25.00

The board of Shikoku Electric Power Company, Incorporated (TSE:9507) has announced that it will be paying its dividend of ¥25.00 on the 1st of December, an increased payment from last year's comparable dividend. This makes the dividend yield 4.0%, which is above the industry average.

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Shikoku Electric Power Company's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Shikoku Electric Power Company's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 16.2%. 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.

Check out our latest analysis for Shikoku Electric Power Company

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥20.00 in 2015 to the most recent total annual payment of ¥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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Shikoku Electric Power Company has impressed us by growing EPS at 30% per 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

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Just as an example, we've come across 3 warning signs for Shikoku Electric Power Company you should be aware of, and 2 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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