Seven Bank (TSE:8410) Has Announced A Dividend Of ¥5.50

Seven Bank, Ltd. (TSE:8410) will pay a dividend of ¥5.50 on the 3rd of June. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Seven Bank

Seven Bank Not Expected To Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Seven Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Seven Bank's payout ratio of 63% is a good sign as this means that earnings decently cover dividends.

Earnings per share is forecast to rise by 21.1% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the future payout ratio reaching 107% over the next year.

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 ¥8.00 in 2014 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. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Earnings per share has been sinking by 17% over the last five years. 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Seven Bank is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.