Banco Santander's (BME:SAN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Banco Santander, S.A. (BME:SAN) has announced that it will be paying its dividend of €0.0656 on the 2nd of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.4%.

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 established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Banco Santander would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 20.8%. The future payout ratio could be 28% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.575 in 2014 to the most recent total annual payment of €0.19. The dividend has fallen 67% over that period. 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

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Banco Santander has been growing its earnings per share at 9.4% a 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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.