Seven Bank (TSE:8410) Will Pay A Dividend Of ¥5.50

The board of Seven Bank, Ltd. (TSE:8410) has announced that it will pay a dividend on the 3rd of June, with investors receiving ¥5.50 per share. This payment means that the dividend yield will be 3.3%, which is around the industry average.

See our latest analysis for Seven Bank

Seven Bank Will Pay Out More Than It Is Earning

We aren't too impressed by dividend yields unless they can be sustained over time.

Seven Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 63%, which means that Seven Bank would be able to pay its last dividend without pressure on the balance sheet.

Earnings per share is forecast to rise by 21.0% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 107%, which probably can't continue putting some pressure on the balance sheet.

Seven Bank Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥8.00 in 2014, and the most recent fiscal year payment was ¥11.00. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

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. Seven Bank's EPS has fallen by approximately 17% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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 becomes a long term trend.

Our Thoughts On Seven Bank's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Seven Bank's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Seven Bank has been making. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Seven Bank that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.