Readers hoping to buy Sparebanken Vest (OB:SVEG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 25th of March, you won't be eligible to receive this dividend, when it is paid on the 7th of April.
Sparebanken Vest's next dividend payment will be kr2.20 per share, and in the last 12 months, the company paid a total of kr4.00 per share. Calculating the last year's worth of payments shows that Sparebanken Vest has a trailing yield of 4.8% on the current share price of NOK83.5. If you buy this business for its dividend, you should have an idea of whether Sparebanken Vest's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sparebanken Vest paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Sparebanken Vest earnings per share are up 3.1% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Sparebanken Vest has lifted its dividend by approximately 1.3% a year on average.
To Sum It Up
Has Sparebanken Vest got what it takes to maintain its dividend payments? Sparebanken Vest has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
With that being said, if dividends aren't your biggest concern with Sparebanken Vest, you should know about the other risks facing this business. Be aware that Sparebanken Vest is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you’re looking to trade Sparebanken Vest, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.