Komercní banka (SEP:KOMB) Is Paying Out A Larger Dividend Than Last Year

The board of Komercní banka, a.s. (SEP:KOMB) has announced that it will be paying its dividend of CZK91.30 on the 26th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 8.2%, providing a nice boost to shareholder returns.

We've discovered 1 warning sign about Komercní banka. View them for free.

Komercní banka's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Komercní banka has a long history of paying out a part of its earnings to shareholders. While there are no guarantees that Komercní banka will always be able to pay out a dividend, the company's payout ratio sits at 100%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.

Over the next 3 years, EPS is forecast to expand by 10.7%. Analyst estimates also show the future payout ratio being 73% in the same 3 years which brings it into quite a comfortable range.

View our latest analysis for Komercní banka

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from CZK62.00 total annually to CZK91.30. This means that it has been growing its distributions at 3.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 3.0% a year for the past five years, which isn't massive but still better than seeing them shrink. The earnings growth is anaemic, and the company is paying out 100% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

Komercní banka's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Komercní banka will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Komercní banka is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for Komercní banka that investors should know about before committing capital to this stock. 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.