Seven Bank, Ltd. (TSE:8410) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Seven Bank, Ltd. (TSE:8410) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Seven Bank investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 3rd of June.

The company's next dividend payment will be JP¥5.50 per share. Last year, in total, the company distributed JP¥11.00 to shareholders. Based on the last year's worth of payments, Seven Bank stock has a trailing yield of around 3.6% on the current share price of JP¥303.40. If you buy this business for its dividend, you should have an idea of whether Seven Bank's dividend is reliable and sustainable. So we need to investigate whether Seven Bank can afford its dividend, and if the dividend could grow.

View our latest analysis for Seven Bank

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Seven Bank paying out a modest 48% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Seven Bank's earnings per share have been growing at 10% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Seven Bank has delivered an average of 4.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

From a dividend perspective, should investors buy or avoid Seven Bank? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Seven Bank appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Seven Bank is facing. We've identified 2 warning signs with Seven Bank (at least 1 which is concerning), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.