First Bank Of Toyama's (TSE:7184) Dividend Will Be ¥15.00

The First Bank Of Toyama, Ltd. (TSE:7184) will pay a dividend of ¥15.00 on the 24th of June. Despite this raise, the dividend yield of 2.4% is only a modest boost to shareholder returns.

Check out our latest analysis for First Bank Of Toyama

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

If it is predictable over a long period, even low dividend yields can be attractive.

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 6.4%, showing that the company can pay out its dividends comfortably.

If the trend of the last few years continues, EPS will grow by 42.4% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

First Bank Of Toyama's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2015, the dividend has gone from ¥14.00 total annually to ¥27.00. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. First Bank Of Toyama has seen EPS rising for the last five years, at 42% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like First Bank Of Toyama's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for First Bank Of Toyama that you should be aware of before investing. 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.