First Bank Of Toyama (TSE:7184) Will Pay A Dividend Of ¥18.00

The First Bank Of Toyama, Ltd. (TSE:7184) will pay a dividend of ¥18.00 on the 5th of December. The payment will take the dividend yield to 2.7%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Bank Of Toyama's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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First Bank Of Toyama's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

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. Using data from its latest earnings report, First Bank Of Toyama's payout ratio sits at 19%, an extremely comfortable number that shows that it can pay its dividend.

If the trend of the last few years continues, EPS will grow by 40.4% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 18%, 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

First Bank Of Toyama has been paying dividends for a while, but the track record isn't stellar. 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 ¥36.00. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. First Bank Of Toyama has impressed us by growing EPS at 40% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

First Bank Of Toyama Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for First Bank Of Toyama that you should be aware of before investing. Is First Bank Of Toyama not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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