Banco Internacional (SNSE:BINT) Has Announced That Its Dividend Will Be Reduced To CLP3.5

Banco Internacional (SNSE:BINT) has announced it will be reducing its dividend payable on the 22nd of April to CLP3.5, which is 11% lower than what investors received last year for the same period. This means that the annual payment is 3.2% of the current stock price, which is lower than what the rest of the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Banco Internacional's stock price has increased by 88% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Banco Internacional

Banco Internacional's Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 8 years, Banco Internacional has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 30%shows that Banco Internacional would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 10.4% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Banco Internacional's Dividend Has Lacked Consistency

Looking back, Banco Internacional's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was CLP4.19, compared to the most recent full-year payment of CLP3.95. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Banco Internacional has grown earnings per share at 10% per year over the past five years. Banco Internacional definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Banco Internacional's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Banco Internacional does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Banco Internacional (1 shouldn't be ignored!) that you should be aware of before investing. Is Banco Internacional 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.