Komercní banka (SEP:KOMB) Will Pay A Larger Dividend Than Last Year At CZK82.66

Komercní banka, a.s. (SEP:KOMB) will increase its dividend from last year's comparable payment on the 27th of May to CZK82.66. This makes the dividend yield 9.6%, which is above the industry average.

See our latest analysis for Komercní banka

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having distributed dividends for at least 10 years, Komercní banka has a long history of paying out a part of its earnings to shareholders. Although the company has a long history in paying out dividends, Komercní banka's latest earnings report shows a payout ratio of 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 4.7%. Analyst estimates also show the future payout ratio being 68% in the same 3 years which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was CZK46.00, compared to the most recent full-year payment of CZK82.66. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Komercní banka May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Komercní banka's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

The Dividend Could Prove To Be Unreliable

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

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Komercní banka that you should be aware of before investing. 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.