Seven Bank (TSE:8410) Has Affirmed Its Dividend Of ¥5.50

Seven Bank, Ltd. (TSE:8410) has announced that it will pay a dividend of ¥5.50 per share on the 3rd of June. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

Seven Bank Not Expected To Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Seven Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions unfortunately do not guarantee future ones, and Seven Bank's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is an alarming sign that could mean that Seven Bank's dividend at its current rate may no longer be sustainable for longer.

Over the next year, EPS is forecast to expand by 17.5%. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 110%, which probably can't continue putting some pressure on the balance sheet.

See our latest analysis for Seven Bank

Seven Bank Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥7.50 in 2015 to the most recent total annual payment of ¥11.00. This means that it has been growing its distributions at 3.9% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Seven Bank's EPS has declined at around 17% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Seven Bank that investors should take into consideration. 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.