Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Sparebanken Vest (OB:SVEG) has been paying a dividend to shareholders. Today it yields 4.3%. Let’s dig deeper into whether Sparebanken Vest should have a place in your portfolio.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Sparebanken Vest fit our criteria?
Sparebanken Vest has a trailing twelve-month payout ratio of 38%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SVEG’s payout to increase to 46% of its earnings. Assuming a constant share price, this equates to a dividend yield of 5.7%. In addition to this, EPS should increase to NOK6.41. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Sparebanken Vest produces a yield of 4.3%, which is on the low-side for Banks stocks.
Taking into account the dividend metrics, Sparebanken Vest ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SVEG’s future growth? Take a look at our free research report of analyst consensus for SVEG’s outlook.
- Valuation: What is SVEG 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 SVEG 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 firstname.lastname@example.org. 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.