Skjern Bank's (CPH:SKJE) Upcoming Dividend Will Be Larger Than Last Year's

The board of Skjern Bank A/S (CPH:SKJE) has announced that it will be increasing its dividend by 50% on the 10th of March to kr.3.00. This takes the annual payment to 2.8% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Skjern Bank

Skjern Bank's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Skjern Bank was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 19.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Skjern Bank's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from kr.3.00 in 2019 to the most recent annual payment of kr.2.00. Dividend payments have fallen sharply, down 33% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see Skjern Bank has been growing its earnings per share at 19% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Skjern Bank Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Skjern Bank that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.