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. Even though the dividend went up, the yield is still quite low at only 2.3%.

Check out our latest analysis for SEB

SEB's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, SEB's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 57.2% over the next year. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

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 €1.26 in 2014, and the most recent fiscal year payment was €2.62. This means that it has been growing its distributions at 7.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. SEB might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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

Overall, we always like to see the dividend being raised, but we don't think SEB will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think SEB is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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.