Skjern Bank (CPH:SKJE) Is Paying Out A Larger Dividend Than Last Year

Skjern Bank A/S (CPH:SKJE) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of March to DKK5.00. Despite this raise, the dividend yield of 3.0% is only a modest boost to shareholder returns.

See our latest analysis for Skjern Bank

Skjern Bank's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Skjern Bank has a good history of paying out dividends, with its current track record at 5 years. While past records don't necessarily translate into future results, the company's payout ratio of 19% also shows that Skjern Bank is able to comfortably pay dividends.

Looking forward, earnings per share could rise by 13.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

Skjern Bank's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from DKK3.00 total annually to DKK5.00. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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 Skjern Bank has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Skjern Bank's prospects of growing its dividend payments in the future.

Skjern Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Skjern Bank 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. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Skjern Bank that investors should know about before committing capital to this stock. Is Skjern Bank 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.