Suruga Bank (TSE:8358) Has Announced That It Will Be Increasing Its Dividend To ¥18.50

Suruga Bank Ltd. (TSE:8358) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of December to ¥18.50. Even though the dividend went up, the yield is still quite low at only 2.5%.

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Suruga Bank's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having distributed dividends for at least 10 years, Suruga Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Suruga Bank's payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 13.2%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 27% by next year, which is in a pretty sustainable range.

See our latest analysis for Suruga 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 ¥19.00 in 2015 to the most recent total annual payment of ¥37.00. This means that it has been growing its distributions at 6.9% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 2.5% per year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Suruga Bank's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Suruga Bank that investors need to be conscious of moving forward. Is Suruga 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.