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 of ¥5.50 per share on the 2nd of December. 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.

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Seven Bank's Earnings Will Easily Cover The Distributions

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 72% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 11.2%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 56% by next year, which is in a pretty sustainable range.

View our latest analysis for Seven Bank

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 ¥8.00 in 2015 to the most recent total annual payment of ¥11.00. This means that it has been growing its distributions at 3.2% per annum over that time. 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Seven Bank has seen earnings per share falling at 3.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Seven Bank that investors need to be conscious of moving forward. 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.