Banco Santander (BME:SAN) Is Increasing Its Dividend To €0.0656

Banco Santander, S.A.'s (BME:SAN) dividend will be increasing from last year's payment of the same period to €0.0656 on 2nd of November. Based on this payment, the dividend yield for the company will be 4.8%, which is fairly typical for the industry.

Check out our latest analysis for Banco Santander

Banco Santander's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Banco Santander has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. 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.

Looking forward, EPS is forecast to rise by 19.0% over the next 3 years. Analysts estimate the future payout ratio will be 27% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.575 in 2014, and the most recent fiscal year payment was €0.19. This works out to a decline of approximately 67% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Banco Santander Could Grow Its Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Banco Santander has impressed us by growing EPS at 9.3% 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.

We Really Like Banco Santander's Dividend

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.

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 instance, we've picked out 1 warning sign for Banco Santander that investors should take into consideration. Is Banco Santander 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.