SpareBank 1 Sør-Norge (OB:SB1NO) Has Announced That It Will Be Increasing Its Dividend To NOK8.50

SpareBank 1 Sør-Norge ASA's (OB:SB1NO) periodic dividend will be increasing on the 5th of May to NOK8.50, with investors receiving 13% more than last year's NOK7.50. Based on this payment, the dividend yield for the company will be 4.8%, which is fairly typical for the industry.

Check out our latest analysis for SpareBank 1 Sør-Norge

SpareBank 1 Sør-Norge's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, SpareBank 1 Sør-Norge has a long history of paying out a part of its earnings to shareholders. Based on SpareBank 1 Sør-Norge's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 14.2%. Despite that, analysts estimate the future payout ratio could be 63% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was NOK1.60 in 2015, and the most recent fiscal year payment was NOK7.50. This means that it has been growing its distributions at 17% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See SpareBank 1 Sør-Norge's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SpareBank 1 Sør-Norge has impressed us by growing EPS at 10.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

SpareBank 1 Sør-Norge 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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for SpareBank 1 Sør-Norge 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.