SEB SA (EPA:SK) will increase its dividend on the 2nd of June to €2.45. The announced payment will take the dividend yield to 2.0%, which is in line with the average for the industry.
View our latest analysis for SEB
SEB's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, SEB was easily earning enough to 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 7.7% over the next year. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.
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 2012, the first annual payment was €1.14, compared to the most recent full-year payment of €2.45. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. 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 Looks Likely To Grow
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. SEB has seen EPS rising for the last five years, at 12% per annum. SEB definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
SEB 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for SEB that investors need to be conscious of moving forward. Is SEB 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.
About ENXTPA:SK
SEB
Designs, manufactures, and markets small domestic equipment worldwide.
Very undervalued with solid track record and pays a dividend.
