Shikoku Bank's (TSE:8387) Dividend Will Be ¥25.00

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 dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

View our latest analysis for Shikoku Bank

Shikoku Bank's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Shikoku Bank has a long history of paying out a part of its earnings to shareholders. Based on Shikoku Bank's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

If the trend of the last few years continues, EPS will grow by 3.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 29% 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. Since 2015, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥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's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.0% per year. If Shikoku Bank is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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 dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. 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.