Kyushu Financial Group (TSE:7180) Is Increasing Its Dividend To ¥11.00

The board of Kyushu Financial Group, Inc. (TSE:7180) has announced that it will be paying its dividend of ¥11.00 on the 3rd of June, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.9%, which is fairly typical for the industry.

View our latest analysis for Kyushu Financial Group

Kyushu Financial Group's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Kyushu Financial Group has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Kyushu Financial Group's payout ratio of 32% is a good sign for current shareholders as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 18.2%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 32% by next year, which is in a pretty sustainable range.

Kyushu Financial Group Is Still Building Its Track Record

Kyushu Financial Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was ¥5.00 in 2016, and the most recent fiscal year payment was ¥22.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Kyushu Financial Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.8% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Kyushu Financial Group could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Kyushu Financial Group management tenure, salary, and performance. 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.