Suruga Bank (TSE:8358) Has Announced A Dividend Of ¥14.50

The board of Suruga Bank Ltd. (TSE:8358) has announced that it will pay a dividend on the 4th of June, with investors receiving ¥14.50 per share. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

Check out our latest analysis for Suruga Bank

Suruga Bank's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Suruga Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Suruga Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 9.7%. If the dividend continues along recent trends, we estimate the future payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥17.00 in 2015, and the most recent fiscal year payment was ¥29.00. This means that it has been growing its distributions at 5.5% per annum 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. Suruga Bank might have put its house in order since then, but we remain cautious.

We Could See Suruga Bank's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Suruga Bank has impressed us by growing EPS at 6.5% 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.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Suruga Bank that you should be aware of before investing. 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.