Sparebanken Øst's (OB:SPOG) Upcoming Dividend Will Be Larger Than Last Year's

The board of Sparebanken Øst (OB:SPOG) has announced that it will be paying its dividend of NOK5.40 on the 5th of April, an increased payment from last year's comparable dividend. This makes the dividend yield 9.9%, which is above the industry average.

View our latest analysis for Sparebanken Øst

Sparebanken Øst's Dividend Forecasted To Be Well Covered By Earnings

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

Having distributed dividends for at least 10 years, Sparebanken Øst has a long history of paying out a part of its earnings to shareholders. Although the company has a long history in paying out dividends, Sparebanken Øst's latest earnings report shows a payout ratio of 95%. This is a sign that Sparebanken Øst is barely covering its dividend.

Looking forward, earnings per share is forecast to fall by 6.0% over the next 3 years. However, analysts forecast that the future payout ratio could reach 85% over the same time period. This is definitely on the higher side of what we consider sustainable.

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 NOK3.00 in 2014, and the most recent fiscal year payment was NOK5.40. This means that it has been growing its distributions at 6.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

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. Although it's important to note that Sparebanken Øst's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

We're Not Big Fans Of Sparebanken Øst's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Sparebanken Øst that investors should take into consideration. Is Sparebanken Øst not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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