SEB (EPA:SK) Is Paying Out A Larger Dividend Than Last Year

SEB SA (EPA:SK) has announced that it will be increasing its periodic dividend on the 5th of June to €2.80, which will be 6.9% higher than last year's comparable payment amount of €2.62. This makes the dividend yield about the same as the industry average at 3.1%.

Check out our latest analysis for SEB

SEB's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by SEB's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 152.0%. If the dividend continues on this path, the payout ratio could be 28% 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 2015, the annual payment back then was €1.26, compared to the most recent full-year payment of €2.62. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though SEB's EPS has declined at around 9.3% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SEB has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.