State Bank of India's (NSE:SBIN) Dividend Will Be Increased To ₹11.30

The board of State Bank of India (NSE:SBIN) has announced that it will be paying its dividend of ₹11.30 on the 14th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 2.0%, which is above the industry average.

View our latest analysis for State Bank of India

State Bank of India's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

State Bank of India has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past records don't necessarily translate into future results, the company's payout ratio of 18% also shows that State Bank of India is able to comfortably pay dividends.

The next 3 years are set to see EPS grow by 42.0%. The future payout ratio could be 16% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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 2013, the annual payment back then was ₹3.50, compared to the most recent full-year payment of ₹11.30. This means that it has been growing its distributions at 12% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. It's encouraging to see that State Bank of India has been growing its earnings per share at 51% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like State Bank of India's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend 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. To that end, State Bank of India has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.