Daishi Hokuetsu Financial Group's (TSE:7327) Shareholders Will Receive A Bigger Dividend Than Last Year

Daishi Hokuetsu Financial Group, Inc.'s (TSE:7327) dividend will be increasing from last year's payment of the same period to ¥90.00 on 2nd of December. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

View our latest analysis for Daishi Hokuetsu Financial Group

Daishi Hokuetsu Financial Group's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having paid out dividends for 5 years, Daishi Hokuetsu Financial Group has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 28%shows that Daishi Hokuetsu Financial Group would be able to pay its last dividend without pressure on the balance sheet.

Unless the company can turn things around, EPS could fall by 19.6% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 44%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Daishi Hokuetsu Financial Group Doesn't Have A Long Payment History

It is great to see that Daishi Hokuetsu Financial Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 5 years was ¥120.00 in 2019, and the most recent fiscal year payment was ¥180.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Daishi Hokuetsu Financial Group's EPS has declined at around 20% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Daishi Hokuetsu Financial Group will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Daishi Hokuetsu Financial Group has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Daishi Hokuetsu Financial Group 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.