North Pacific BankLtd (TSE:8524) Is Due To Pay A Dividend Of ¥6.50

North Pacific Bank,Ltd.'s (TSE:8524) investors are due to receive a payment of ¥6.50 per share on 27th of June. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

View our latest analysis for North Pacific BankLtd

North Pacific BankLtd's Payment Expected To Have Solid Earnings Coverage

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

North Pacific BankLtd has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 13% also shows that North Pacific BankLtd is able to comfortably pay dividends.

The next year is set to see EPS grow by 21.8%. If the dividend continues on this path, the future payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥13.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

North Pacific BankLtd May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. If North Pacific BankLtd is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On North Pacific BankLtd's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

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. For example, we've picked out 1 warning sign for North Pacific BankLtd that investors should know about before committing capital to this stock. 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.