Sparebanken Vest (OB:SVEG) Is Increasing Its Dividend To NOK5.50

The board of Sparebanken Vest (OB:SVEG) has announced that it will be increasing its dividend by 22% on the 31st of March to NOK5.50, up from last year's comparable payment of NOK4.50. The payment will take the dividend yield to 4.6%, which is in line with the average for the industry.

See our latest analysis for Sparebanken Vest

Sparebanken Vest's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Sparebanken Vest has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Sparebanken Vest's last earnings report, the payout ratio is at a decent 43%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 5.5%. Analysts forecast the future payout ratio could be 49% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from NOK2.00 total annually to NOK4.50. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Sparebanken Vest might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Sparebanken Vest has seen EPS rising for the last five years, at 37% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Sparebanken Vest could prove to be a strong dividend payer.

Sparebanken Vest Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Sparebanken Vest is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Sparebanken Vest that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.