Keiyo Bank (TSE:8544) Is Increasing Its Dividend To ¥13.00

The Keiyo Bank, Ltd. (TSE:8544) will increase its dividend from last year's comparable payment on the 4th of December to ¥13.00. Based on this payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.

Check out our latest analysis for Keiyo Bank

Keiyo Bank's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Keiyo Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Keiyo Bank's latest earnings report puts its payout ratio at 23%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share could rise by 8.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 22% 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 dividend has gone from ¥20.00 total annually to ¥26.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Keiyo Bank Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Keiyo Bank has grown earnings per share at 8.2% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Keiyo Bank Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Keiyo Bank that investors need to be conscious of moving forward. Is Keiyo 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.