Tokyo Energy & Systems (TSE:1945) Is Paying Out A Larger Dividend Than Last Year

Tokyo Energy & Systems Inc. (TSE:1945) will increase its dividend from last year's comparable payment on the 30th of June to ¥29.00. This takes the annual payment to 3.2% of the current stock price, which is about average for the industry.

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Tokyo Energy & Systems' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last dividend, Tokyo Energy & Systems is earning enough to cover the payment, but then it makes up 2,235% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS could expand by 6.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Tokyo Energy & Systems

Tokyo Energy & Systems Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥58.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Tokyo Energy & Systems has seen EPS rising for the last five years, at 6.6% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Tokyo Energy & Systems' Dividend

Overall, we always like to see the dividend being raised, but we don't think Tokyo Energy & Systems will make a great income stock. While Tokyo Energy & Systems is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Tokyo Energy & Systems that you should be aware of before investing. 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.