Sumitomo Mitsui Financial Group (TSE:8316) Is Increasing Its Dividend To ¥79.00

Sumitomo Mitsui Financial Group, Inc. (TSE:8316) will increase its dividend from last year's comparable payment on the 21st of July to ¥79.00. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

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Sumitomo Mitsui Financial Group'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.

Sumitomo Mitsui Financial Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Sumitomo Mitsui Financial Group's payout ratio of 79% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 18.0%. Assuming the dividend continues along recent trends, our estimates say the future payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Sumitomo Mitsui Financial Group

Sumitomo Mitsui Financial Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥43.33 in 2015 to the most recent total annual payment of ¥158.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Sumitomo Mitsui Financial Group has grown earnings per share at 81% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Sumitomo Mitsui Financial Group hasn't been doing.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Sumitomo Mitsui Financial Group will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Sumitomo Mitsui Financial Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Sumitomo Mitsui Financial Group 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.