Bankinter's (BME:BKT) Upcoming Dividend Will Be Larger Than Last Year's

Bankinter, S.A. (BME:BKT) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of March to €0.0723. This takes the annual payment to 3.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Bankinter

Bankinter's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Bankinter has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Bankinter's last earnings report, the payout ratio is at a decent 82%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 5.3% over the next 3 years. Analyst estimates also show the future payout ratio being 51% 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. The annual payment during the last 10 years was €0.071 in 2013, and the most recent fiscal year payment was €0.222. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Bankinter has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

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. However, Bankinter has only grown its earnings per share at 3.0% per annum over the past five years. Slow growth and a high payout ratio could mean that Bankinter has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Bankinter's Dividend

Overall, we always like to see the dividend being raised, but we don't think Bankinter will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for Bankinter that investors need to be conscious of moving forward. Is Bankinter 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.