The board of Suruga Bank Ltd. (TSE:8358) has announced that it will pay a dividend of ¥11.00 per share on the 12th of December. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.
View our latest analysis for Suruga Bank
Suruga Bank's 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.
Suruga Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past records don't necessarily translate into future results, the company's payout ratio of 23% also shows that Suruga Bank is able to comfortably pay dividends.
The next year is set to see EPS grow by 0.4%. If the dividend continues along recent trends, we estimate the future payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was ¥17.00, compared to the most recent full-year payment of ¥22.00. This means that it has been growing its distributions at 2.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Suruga Bank has grown earnings per share at 19% per year over the past five years. 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. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Suruga Bank (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:8358
Suruga Bank
Provides various banking and financial products and services to individuals and corporate customers in Japan.
Solid track record with adequate balance sheet.
