Sparebanken Vest's (OB:SVEG) Shareholders Will Receive A Bigger Dividend Than Last Year

Sparebanken Vest (OB:SVEG) will increase its dividend on the 6th of April to kr4.50. This takes the dividend yield from 4.7% to 6.6%, which shareholders will be pleased with.

Check out our latest analysis for Sparebanken Vest

Sparebanken Vest's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Sparebanken Vest was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 0.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 71%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was kr3.50 in 2012, and the most recent fiscal year payment was kr4.50. This means that it has been growing its distributions at 2.5% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Sparebanken Vest Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sparebanken Vest has impressed us by growing EPS at 7.9% 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.

Our Thoughts On Sparebanken Vest's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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. 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.