Sparebanken Vest (OB:SVEG) Is Paying Out A Larger Dividend Than Last Year

Sparebanken Vest (OB:SVEG) will increase its dividend from last year's comparable payment on the 4th of April to NOK7.50. Although the dividend is now higher, the yield is only 4.6%, which is below the industry average.

Check out our latest analysis for Sparebanken Vest

Sparebanken Vest's Earnings Will Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Sparebanken Vest has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 48%, 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 expand by 5.4%. Analysts forecast the future payout ratio could be 55% 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. The dividend has gone from an annual total of NOK2.50 in 2014 to the most recent total annual payment of NOK5.50. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sparebanken Vest has seen EPS rising for the last five years, at 40% per annum. 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.

We Really Like Sparebanken Vest's Dividend

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs 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.