Chiba Bank's (TSE:8331) Upcoming Dividend Will Be Larger Than Last Year's

The Chiba Bank, Ltd.'s (TSE:8331) dividend will be increasing from last year's payment of the same period to ¥22.00 on 27th of June. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.

Chiba Bank's Dividend Forecasted To Be Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, Chiba Bank 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 37%, which means that Chiba Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 14.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Chiba Bank

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥44.00. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Growth Potential

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. Chiba Bank has seen EPS rising for the last five years, at 7.4% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Chiba Bank that you should be aware of before investing. Is Chiba Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.