Suruga Bank Ltd.'s (TSE:8358) investors are due to receive a payment of ¥14.50 per share on 4th of June. This makes the dividend yield about the same as the industry average at 2.5%.
Check out our latest analysis for Suruga Bank
Suruga Bank's Payment Expected To Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Suruga Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Suruga Bank's last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to rise by 12.0% over the next year. 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.
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 dividend has gone from ¥17.00 total annually to ¥29.00. This means that it has been growing its distributions at 5.5% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Suruga Bank might have put its house in order since then, but we remain cautious.
Suruga Bank May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Suruga Bank's EPS was effectively flat over the past five years, which could stop the company from paying more every 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.
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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Suruga Bank that investors should know about before committing capital to this stock. 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.
About TSE:8358
Suruga Bank
Provides various banking and financial products and services to individuals and corporate customers in Japan.
Proven track record with adequate balance sheet.
