Keiyo Bank's (TSE:8544) Dividend Will Be Increased To ¥18.00

The Keiyo Bank, Ltd.'s (TSE:8544) dividend will be increasing from last year's payment of the same period to ¥18.00 on 3rd of December. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

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Keiyo Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Keiyo Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Keiyo Bank's last earnings report, the payout ratio is at a decent 32%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share could rise by 19.7% 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 30% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Keiyo Bank

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥22.00 total annually to ¥36.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Keiyo Bank might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Keiyo Bank has been growing its earnings per share at 20% a year over the past five years. Keiyo Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Keiyo Bank Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an 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 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.