SpareBank 1 Østlandet's (OB:SPOL) Upcoming Dividend Will Be Larger Than Last Year's

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. Based on this payment, the dividend yield for the company will be 6.4%, which is fairly typical for the industry.

See our latest analysis for SpareBank 1 Østlandet

SpareBank 1 Østlandet's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

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.

EPS is set to fall by 17.4% over the next 3 years. However, analysts forecast that the future payout ratio could reach 75% over the same time period. This is definitely on the higher side of what we consider sustainable.

SpareBank 1 Østlandet Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was NOK3.96, compared to the most recent full-year payment of NOK10.30. This means that it has been growing its distributions at 15% per annum over that time. SpareBank 1 Østlandet has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

SpareBank 1 Østlandet Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. SpareBank 1 Østlandet has seen EPS rising for the last five years, at 7.5% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

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.

Our Thoughts On SpareBank 1 Østlandet's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 SpareBank 1 Østlandet that investors should take into consideration. 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.