Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SpareBank 1 SMN (OB:MING) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase SpareBank 1 SMN's shares before the 25th of March to receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be kr7.50 per share. Last year, in total, the company distributed kr7.50 to shareholders. Based on the last year's worth of payments, SpareBank 1 SMN stock has a trailing yield of around 5.1% on the current share price of NOK146.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether SpareBank 1 SMN can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SpareBank 1 SMN paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. SpareBank 1 SMN paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, SpareBank 1 SMN's earnings per share have been growing at 11% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. SpareBank 1 SMN has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is SpareBank 1 SMN worth buying for its dividend? SpareBank 1 SMN has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, SpareBank 1 SMN looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, SpareBank 1 SMN has 2 warning signs (and 1 which is significant) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Valuation is complex, but we're helping make it simple.
Find out whether SpareBank 1 SMN is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
SpareBank 1 SMN
SpareBank 1 SMN, together with its subsidiaries, provides various banking, accounting, and real estate products and services to private individuals and companies in Norway and internationally.
Excellent balance sheet established dividend payer.