Okinawa Electric Power Company's (TSE:9511) Shareholders Will Receive A Bigger Dividend Than Last Year

The Okinawa Electric Power Company, Incorporated (TSE:9511) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of December to ¥15.00. This will take the annual payment to 3.2% of the stock price, which is above what most companies in the industry pay.

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Okinawa 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. Based on the last payment, Okinawa Electric Power Company was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 5.4% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Okinawa Electric Power Company

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥18.47 in 2015 to the most recent total annual payment of ¥30.00. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Okinawa Electric Power Company's EPS has declined at around 8.3% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Okinawa Electric Power Company's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Okinawa Electric Power Company will make a great income stock. While Okinawa Electric Power Company is earning enough to cover the payments, the cash flows are lacking. We don't think Okinawa Electric Power Company is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Okinawa Electric Power Company (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Okinawa 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.