SEB (EPA:SK) Has Announced That It Will Be Increasing Its Dividend To €2.62

The board of SEB SA (EPA:SK) has announced that it will be paying its dividend of €2.62 on the 5th of June, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

Check out our latest analysis for SEB

SEB's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, SEB's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 70.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from €1.26 total annually to €2.62. This means that it has been growing its distributions at 7.6% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, SEB's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On SEB's Dividend

In summary, while it's always good to see the dividend being raised, we don't think SEB's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for SEB that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.