Sparebanken Vest (OB:SVEG) Is Increasing Its Dividend To NOK8.50

Sparebanken Vest's (OB:SVEG) dividend will be increasing from last year's payment of the same period to NOK8.50 on 7th of April. The payment will take the dividend yield to 6.2%, which is in line with the average for the industry.

View our latest analysis for Sparebanken Vest

Sparebanken Vest's Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Sparebanken Vest has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that Sparebanken Vest would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to fall by 9.3%. However, as estimated by analysts, the future payout ratio could be 66% over the same time period, which we think the company can easily 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. The annual payment during the last 10 years was NOK3.00 in 2015, and the most recent fiscal year payment was NOK8.50. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. We are encouraged to see that Sparebanken Vest has grown earnings per share at 42% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 1 warning sign for Sparebanken Vest 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.