Sunndal Sparebank's (OB:SUNSB) Shareholders Will Receive A Smaller Dividend Than Last Year

Sunndal Sparebank's (OB:SUNSB) dividend is being reduced by 6.7% to NOK7.00 per share on 9th of April, in comparison to last year's comparable payment of NOK7.50. The dividend yield will be in the average range for the industry at 6.3%.

Check out our latest analysis for Sunndal Sparebank

Sunndal Sparebank's Earnings Will Easily Cover The Distributions

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

Sunndal Sparebank has a good history of paying out dividends, with its current track record at 6 years. Taking data from its last earnings report, calculating for the company's payout ratio of 76%shows that Sunndal Sparebank would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 27.3%. The future payout ratio over that same time horizon is estimated by analysts to be 76% which is a bit high but can definitely be sustainable.

Sunndal Sparebank's Dividend Has Lacked Consistency

Sunndal Sparebank has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. There hasn't been much of a change in the dividend over the last 6 years. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Sunndal Sparebank Might Find It Hard To Grow Its Dividend

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. It's encouraging to see that Sunndal Sparebank has been growing its earnings per share at 24% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Sunndal Sparebank is not retaining those earnings to reinvest in growth.

Our Thoughts On Sunndal Sparebank's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

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 2 warning signs for Sunndal Sparebank that investors should take into consideration. Is Sunndal Sparebank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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