Oita Bank's (TSE:8392) Upcoming Dividend Will Be Larger Than Last Year's

The board of The Oita Bank, Ltd. (TSE:8392) has announced that it will be increasing its dividend by 20% on the 23rd of June to ¥60.00, up from last year's comparable payment of ¥50.00. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

Check out our latest analysis for Oita Bank

Oita Bank's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Oita Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 9.4% also shows that Oita Bank is able to comfortably pay dividends.

If the trend of the last few years continues, EPS will grow by 25.0% over the next 12 months. 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.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥60.00 in 2015 to the most recent total annual payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. 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. Oita Bank has seen EPS rising for the last five years, at 25% per annum. 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 Oita Bank's Dividend

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Oita Bank that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.