SpareBank 1 Østlandet (OB:SPOL) Is Paying Out A Larger Dividend Than Last Year

SpareBank 1 Østlandet's (OB:SPOL) dividend will be increasing from last year's payment of the same period to NOK10.30 on 4th of April. This makes the dividend yield about the same as the industry average at 6.4%.

See our latest analysis for SpareBank 1 Østlandet

SpareBank 1 Østlandet's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

SpareBank 1 Østlandet has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Based on SpareBank 1 Østlandet's last earnings report, the payout ratio is at a decent 54%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 14.2% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 72% over the same time period, which is in a pretty comfortable range.

SpareBank 1 Østlandet Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the dividend has gone from NOK3.96 total annually to NOK10.30. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

SpareBank 1 Østlandet Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that SpareBank 1 Østlandet has been growing its earnings per share at 7.5% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SpareBank 1 Østlandet's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for SpareBank 1 Østlandet that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.