Nanto Bank's (TSE:8367) Dividend Will Be ¥64.00

The Nanto Bank, Ltd. (TSE:8367) will pay a dividend of ¥64.00 on the 1st of July. However, the dividend yield of 2.7% still remains in a typical range for the industry.

See our latest analysis for Nanto Bank

Nanto Bank Will Pay Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Nanto Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Nanto Bank's last earnings report, the payout ratio is at a decent 63%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS could fall by 15.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could reach 100%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥60.00, compared to the most recent full-year payment of ¥80.00. This means that it has been growing its distributions at 2.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 16% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Nanto Bank's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Nanto Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for Nanto Bank (of which 1 is significant!) you should know about. 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.