Banco Santander (BME:SAN) Is Increasing Its Dividend To €0.081

Banco Santander, S.A. (BME:SAN) will increase its dividend from last year's comparable payment on the 1st of November to €0.081. This takes the annual payment to 4.1% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Banco Santander

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

Even a low dividend yield can be attractive if it is sustained for years on end.

Banco Santander has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, Banco Santander's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 18.9%. Analysts forecast the future payout ratio could be 39% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was €0.575, compared to the most recent full-year payment of €0.19. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. 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, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Banco Santander that investors should take into consideration. 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.