Banco Santander-Chile's (SNSE:BSANTANDER) Shareholders Will Receive A Smaller Dividend Than Last Year

Banco Santander-Chile (SNSE:BSANTANDER) has announced it will be reducing its dividend payable on the 24th of April to CLP1.84, which is 28% lower than what investors received last year for the same period. However, the dividend yield of 5.3% still remains in a typical range for the industry.

See our latest analysis for Banco Santander-Chile

Banco Santander-Chile's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Banco Santander-Chile has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Banco Santander-Chileis pulling cash from elsewhere to keep its shareholders happy.

The next 3 years are set to see EPS grow by 54.1%. Analyst estimates also show the future payout ratio being 60% in the same 3 years which brings it into quite a comfortable range.

Banco Santander-Chile Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CLP1.24 in 2014, and the most recent fiscal year payment was CLP2.57. This means that it has been growing its distributions at 7.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Banco Santander-Chile hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Banco Santander-Chile's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the current distribution levels might be a bit unsustainable, we can't deny that until now it has been very stable. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Banco Santander-Chile that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.