Suruga Bank (TSE:8358) Will Pay A Dividend Of ¥11.00

Suruga Bank Ltd. (TSE:8358) will pay a dividend of ¥11.00 on the 12th of December. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for Suruga Bank

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. While past data isn't a guarantee for the future, Suruga Bank's latest earnings report puts its payout ratio at 23%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 0.06% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 23%, which would be comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥17.00 in 2014, and the most recent fiscal year payment was ¥22.00. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Suruga Bank has seen EPS rising for the last five years, at 19% per annum. Suruga Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Suruga Bank 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 generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, Suruga Bank has 2 warning signs (and 1 which is concerning) we think you should know about. 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.