Bank of The Ryukyus (TSE:8399) Is Increasing Its Dividend To ¥20.00

Bank of The Ryukyus, Limited (TSE:8399) will increase its dividend from last year's comparable payment on the 5th of December to ¥20.00. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

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Bank of The Ryukyus' 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.

Bank of The Ryukyus has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, Bank of The Ryukyus' payout ratio sits at 13%, 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 4.0% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Bank of The Ryukyus

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Bank of The Ryukyus has only grown its earnings per share at 4.0% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

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 Bank of The Ryukyus that investors should take into consideration. Is Bank of The Ryukyus 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.