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

The board of Seven Bank, Ltd. (TSE:8410) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥5.50 per share. Based on this payment, the dividend yield on the company's stock will be 4.0%, which is an attractive boost to shareholder returns.

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Seven Bank's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Seven Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign for the sustainability of its dividends, as it may mean that Seven Bankis pulling cash from elsewhere to keep its shareholders happy.

The next year is set to see EPS grow by 12.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the future payout ratio being 54% which brings it into quite a comfortable range.

See our latest analysis for Seven Bank

Seven Bank Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥8.00 in 2015 to the most recent total annual payment of ¥11.00. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, Seven Bank's earnings per share has shrunk at approximately 3.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Seven Bank's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Seven Bank that you should be aware of before investing. Is Seven Bank 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.