A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Skue Sparebank (OB:SKUE) has been paying a dividend to shareholders. Today it yields 7.2%. Does Skuerebank tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Skuerebank pass our checks?
The company currently pays out 54% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect SKUE’s payout to increase to 60% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 8.1%. In addition to this, EPS should increase to NOK19.77. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Skuerebank as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Skuerebank produces a yield of 7.2%, which is high for Banks stocks.
Taking into account the dividend metrics, Skuerebank ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SKUE’s future growth? Take a look at our free research report of analyst consensus for SKUE’s outlook.
- Valuation: What is SKUE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SKUE is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.