Hyakujushi Bank (TSE:8386) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

The Hyakujushi Bank, Ltd. (TSE:8386) will increase its dividend from last year's comparable payment on the 1st of July to ¥45.00. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

View our latest analysis for Hyakujushi Bank

Hyakujushi Bank's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Hyakujushi Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 34%, which means that Hyakujushi Bank would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 7.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 23% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥70.00 in 2014 to the most recent total annual payment of ¥80.00. This means that it has been growing its distributions at 1.3% 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.

Hyakujushi Bank Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hyakujushi Bank has impressed us by growing EPS at 7.0% per year over the past five years. Hyakujushi Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for Hyakujushi Bank that investors need to be conscious of moving forward. Is Hyakujushi 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.