Secure Trust Bank (LON:STB) Has Announced That Its Dividend Will Be Reduced To £0.113

Secure Trust Bank PLC's (LON:STB) dividend is being reduced by 29% to £0.113 per share on 26th of September, in comparison to last year's comparable payment of £0.16. This means that the annual payment is 3.8% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Secure Trust Bank

Secure Trust Bank's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Secure Trust Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Secure Trust Bank's latest earnings report puts its payout ratio at 23%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 123.4%. The future payout ratio could be 12% 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 annual payment during the last 10 years was £0.62 in 2014, and the most recent fiscal year payment was £0.322. This works out to be a decline of approximately 6.3% per year over that time. 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.

Secure Trust Bank May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Secure Trust Bank's EPS has declined at around 2.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Secure Trust Bank's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Secure Trust Bank has been making. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Secure Trust Bank that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.