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

The board of Skandinaviska Enskilda Banken AB (publ) (STO:SEB A) has announced that it will pay a dividend on the 8th of April, with investors receiving SEK11.50 per share. This makes the dividend yield 6.5%, which will augment investor returns quite nicely.

View our latest analysis for Skandinaviska Enskilda Banken

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.

Skandinaviska Enskilda Banken has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Skandinaviska Enskilda Banken's last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 4.3%. Despite that, analysts estimate the future payout ratio could be 58% over the same time period, which is in a pretty comfortable range.

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 implies that the company grew its distributions at a yearly rate of about 9.2% over that duration. 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. Skandinaviska Enskilda Banken has seen EPS rising for the last five years, at 14% per annum. 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

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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.

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 example, we've identified 2 warning signs for Skandinaviska Enskilda Banken (1 is significant!) that you should be aware of before investing. 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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