A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Sparebanken Øst (OB:SPOG) has paid a dividend to shareholders. It currently yields 7.8%. Let’s dig deeper into whether Sparebanken Øst should have a place in your portfolio.
Check out our latest analysis for Sparebanken Øst
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Sparebanken Øst pass our checks?
The current trailing twelve-month payout ratio for the stock is 77%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SPOG’s payout to remain around the same level at 75% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 6.9%. Furthermore, EPS is forecasted to fall to NOK4.97 in the upcoming year.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Sparebanken Øst 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.
In terms of its peers, Sparebanken Øst produces a yield of 7.8%, which is high for Banks stocks.
Next Steps:
With this in mind, I definitely rank Sparebanken Øst as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SPOG’s future growth? Take a look at our free research report of analyst consensus for SPOG’s outlook.
- Valuation: What is SPOG 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 SPOG 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 editorial-team@simplywallst.com. 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.