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

The board of Sparebanken Vest (OB:SVEG) has announced that it will be increasing its dividend by 13% on the 7th of April to NOK8.50, up from last year's comparable payment of NOK7.50. This takes the annual payment to 5.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for Sparebanken Vest

Sparebanken Vest's Payment Expected To Have Solid Earnings Coverage

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

Sparebanken Vest has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Sparebanken Vest's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to fall by 8.5%. However, as estimated by analysts, the future payout ratio could be 68% over the same time period, which we think the company can easily maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from NOK3.00 total annually to NOK7.50. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sparebanken Vest has impressed us by growing EPS at 18% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Sparebanken Vest Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Sparebanken Vest that investors need to be conscious of moving forward. Is Sparebanken Vest not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.