Shikoku Bank (TSE:8387) Will Pay A Dividend Of ¥28.00

The Shikoku Bank, Ltd. (TSE:8387) has announced that it will pay a dividend of ¥28.00 per share on the 30th of June. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

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Shikoku Bank's Earnings Will Easily Cover The Distributions

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

Shikoku Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Shikoku Bank's payout ratio sits at 16%, an extremely comfortable number that shows that it can pay its dividend.

If the trend of the last few years continues, EPS will grow by 21.2% over the next 12 months. If the dividend continues on this path, the future payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Shikoku Bank

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥30.00 total annually to ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.4% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Shikoku Bank has been growing its earnings per share at 21% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Shikoku Bank's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Shikoku Bank that investors need to be conscious of moving forward. Is Shikoku 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.