Oita Bank (TSE:8392) Is Paying Out A Larger Dividend Than Last Year

The board of The Oita Bank, Ltd. (TSE:8392) has announced that it will be paying its dividend of ¥60.00 on the 23rd of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

See our latest analysis for Oita Bank

Oita Bank's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, Oita Bank has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Oita Bank's latest earnings report puts its payout ratio at 19%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS could expand by 25.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 17% by next year, which is in a pretty sustainable range.

Oita Bank Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥60.00 in 2015 to the most recent total annual payment of ¥120.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Oita Bank has been growing its earnings per share at 25% 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.

Oita Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Oita Bank is a strong income stock thanks to its track record and growing earnings. 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 of these factors considered, we think this has solid potential as a dividend stock.

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. Are management backing themselves to deliver performance? Check their shareholdings in Oita Bank in our latest insider ownership analysis. 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.