Spar Nord Bank's (CPH:SPNO) Dividend Will Be Increased To DKK4.50

The board of Spar Nord Bank A/S (CPH:SPNO) has announced that it will be paying its dividend of DKK4.50 on the 27th of March, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

View our latest analysis for Spar Nord Bank

Spar Nord Bank's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Spar Nord Bank has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 40%shows that Spar Nord Bank would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 19.2% over the next 3 years. Analysts estimate the future payout ratio will be 39% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Spar Nord Bank's Dividend Has Lacked Consistency

It's comforting to see that Spar Nord Bank has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was DKK1.00, compared to the most recent full-year payment of DKK4.50. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See Spar Nord Bank's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Spar Nord Bank has grown earnings per share at 8.0% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On Spar Nord Bank's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Spar Nord Bank that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.