Sparebanken Vest's (OB:SVEG) Dividend Will Be Increased To NOK7.50

Sparebanken Vest's (OB:SVEG) dividend will be increasing from last year's payment of the same period to NOK7.50 on 4th of April. This takes the annual payment to 6.4% 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

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Sparebanken Vest has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 59%, which means that Sparebanken Vest would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 10.7% over the next 3 years. The future payout ratio could be 55% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from NOK2.50 total annually to NOK7.50. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us 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. It's encouraging to see that Sparebanken Vest has been growing its earnings per share at 16% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Sparebanken Vest's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Sparebanken Vest has been making. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Sparebanken Vest that you should be aware of before investing. 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.