Resona Holdings' (TSE:8308) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Resona Holdings, Inc. (TSE:8308) has announced that it will be paying its dividend of ¥11.50 on the 9th of December, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

Check out our latest analysis for Resona Holdings

Resona Holdings' Payment Expected To Have Solid Earnings Coverage

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 distributed dividends for at least 10 years, Resona Holdings has a long 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 shows 29%, which means that Resona Holdings would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to rise by 9.0% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Resona Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2014, and the most recent fiscal year payment was ¥23.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Resona Holdings has only grown its earnings per share at 4.8% per annum over the past five years. If Resona Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Resona Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Resona Holdings 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.