Seven Bank (TSE:8410) Is Paying Out A Dividend Of ¥5.50

Seven Bank, Ltd. (TSE:8410) will pay a dividend of ¥5.50 on the 2nd of December. The dividend yield will be 4.0% based on this payment which is still above the industry average.

Check out our latest analysis for Seven Bank

Seven Bank's Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Seven Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Seven Bank's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 6.6% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 45%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Seven Bank Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥7.00 total annually to ¥11.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

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 seen EPS rising for the last five years, at 20% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

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 company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Seven Bank has 2 warning signs (and 1 which shouldn't be ignored) we think 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