Hokkaido Electric Power Company (TSE:9509) Could Be A Buy For Its Upcoming Dividend

Hokkaido Electric Power Company, Incorporated (TSE:9509) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Hokkaido Electric Power Company's shares before the 28th of March in order to receive the dividend, which the company will pay on the 27th of June.

The company's next dividend payment will be JP¥10.00 per share, and in the last 12 months, the company paid a total of JP¥20.00 per share. Based on the last year's worth of payments, Hokkaido Electric Power Company has a trailing yield of 2.4% on the current stock price of JP¥841.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Hokkaido Electric Power Company has been able to grow its dividends, or if the dividend might be cut.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hokkaido Electric Power Company is paying out just 7.7% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Hokkaido Electric Power Company's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Hokkaido Electric Power Company

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Hokkaido Electric Power Company has grown its earnings rapidly, up 26% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Hokkaido Electric Power Company looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hokkaido Electric Power Company has delivered 17% dividend growth per year on average over the past nine years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Hokkaido Electric Power Company for the upcoming dividend? It's great that Hokkaido Electric Power Company is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Hokkaido Electric Power Company is facing. To help with this, we've discovered 4 warning signs for Hokkaido Electric Power Company (2 shouldn't be ignored!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking 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.