Banco Santander (BME:SAN) Has Announced That It Will Be Increasing Its Dividend To €0.081

The board of Banco Santander, S.A. (BME:SAN) has announced that it will be paying its dividend of €0.081 on the 1st of November, an increased payment from last year's comparable dividend. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

View our latest analysis for Banco Santander

Banco Santander's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Banco Santander has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Banco Santander's payout ratio of 27% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 20.0%. Analysts forecast the future payout ratio could be 40% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.575 in 2014, and the most recent fiscal year payment was €0.20. The dividend has fallen 65% over that period. 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. We are encouraged to see that Banco Santander has grown earnings per share at 13% per year over the past five years. Banco Santander definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Banco Santander Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Banco Santander is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Banco Santander that investors need to be conscious of moving forward. 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.