Skandinaviska Enskilda Banken (STO:SEB A) Has Announced A Dividend Of SEK11.50

Skandinaviska Enskilda Banken AB (publ)'s (STO:SEB A) investors are due to receive a payment of SEK11.50 per share on 8th of April. The dividend yield will be 6.9% based on this payment which is still above the industry average.

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Skandinaviska Enskilda Banken's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Skandinaviska Enskilda Banken 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 49%, which means that Skandinaviska Enskilda Banken would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 0.8% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 59% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Skandinaviska Enskilda Banken

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. Since 2015, the annual payment back then was SEK4.75, compared to the most recent full-year payment of SEK11.50. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

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 Skandinaviska Enskilda Banken has been growing its earnings per share at 14% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Skandinaviska Enskilda Banken's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Skandinaviska Enskilda Banken you should be aware of, and 1 of them is significant. Is Skandinaviska Enskilda Banken 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.