The board of The Shikoku Bank, Ltd. (TSE:8387) has announced that it will pay a dividend of ¥25.00 per share on the 30th of June. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Shikoku Bank
Shikoku Bank's Dividend Forecasted To Be Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Shikoku Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Shikoku Bank's latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.
Over the next year, EPS could expand by 6.7% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥30.00 total annually to ¥50.00. This means that it has been growing its distributions at 5.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shikoku Bank has seen EPS rising for the last five years, at 6.7% per annum. Shikoku Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Shikoku Bank that investors should take into consideration. 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:8387
Shikoku Bank
Provides various commercial banking products and services for individual and corporate customers in Japan.
Good value with proven track record and pays a dividend.
