Chiba Bank's (TSE:8331) Shareholders Will Receive A Bigger Dividend Than Last Year

The Chiba Bank, Ltd.'s (TSE:8331) dividend will be increasing from last year's payment of the same period to ¥24.00 on 5th of December. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

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Chiba Bank's Earnings Will Easily Cover The Distributions

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

Having distributed dividends for at least 10 years, Chiba Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Chiba Bank's payout ratio of 38% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 11.1%. If the dividend continues on this path, the future payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Chiba Bank

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥12.00 in 2015 to the most recent total annual payment of ¥48.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Chiba Bank has impressed us by growing EPS at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Chiba Bank'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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Chiba Bank that investors need to be conscious of moving forward. 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.