Keiyo Bank (TSE:8544) Is Due To Pay A Dividend Of ¥11.50

The Keiyo Bank, Ltd.'s (TSE:8544) investors are due to receive a payment of ¥11.50 per share on 1st of July. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.

See our latest analysis for Keiyo Bank

Keiyo Bank's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Keiyo 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 Keiyo Bank's payout ratio of 26% is a good sign as this means that earnings decently cover dividends.

Unless the company can turn things around, EPS could fall by 0.04% over the next year. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 27%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥20.00 total annually to ¥23.00. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

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. Although it's important to note that Keiyo Bank's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Keiyo Bank's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Keiyo Bank's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Keiyo Bank that investors should take into consideration. 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.