First Bank Of Toyama (TSE:7184) Is Due To Pay A Dividend Of ¥15.00

The board of The First Bank Of Toyama, Ltd. (TSE:7184) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥15.00 per share. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

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First Bank Of Toyama's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 9 years, First Bank Of Toyama has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, First Bank Of Toyama's latest earnings report puts its payout ratio at 12%, showing that the company can pay out its dividends comfortably.

If the trend of the last few years continues, EPS will grow by 36.0% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for First Bank Of Toyama

First Bank Of Toyama's Dividend Has Lacked Consistency

Looking back, First Bank Of Toyama's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥27.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that First Bank Of Toyama has grown earnings per share at 36% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

First Bank Of Toyama Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that First Bank Of Toyama is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 1 warning sign for First Bank Of Toyama that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.