Seven Bank (TSE:8410) Is Paying Out A 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.

Check out our latest analysis for Seven Bank

Seven Bank's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Seven Bank has a long history of paying out a part of its earnings to shareholders. Based on Seven Bank's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 4.4% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 44%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Seven Bank Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥7.00 in 2014 to the most recent total annual payment of ¥11.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Seven Bank has impressed us by growing EPS at 20% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Seven Bank Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Case in point: We've spotted 2 warning signs for Seven Bank (of which 1 makes us a bit uncomfortable!) you should know about. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com