Banco Santander (BME:SAN) Has Announced That It Will Be Increasing Its Dividend To €0.0656

The board of Banco Santander, S.A. (BME:SAN) has announced that it will be paying its dividend of €0.0656 on the 2nd of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.3%.

Check out our latest analysis for Banco Santander

Banco Santander's Earnings Will Easily Cover The Distributions

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

Banco Santander 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 Banco Santander's payout ratio of 27% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 20.8%. Analysts forecast the future payout ratio could be 27% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.575 in 2014 to the most recent total annual payment of €0.19. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Banco Santander has seen EPS rising for the last five years, at 9.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Banco Santander's prospects of growing its dividend payments in the future.

We Really Like Banco Santander's Dividend

Overall, a dividend increase is always good, and we think that Banco Santander is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Banco Santander that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.