Skandinaviska Enskilda Banken (STO:SEB A) Is Due To Pay 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 7.3%, which will augment investor returns quite nicely.

View our latest analysis for Skandinaviska Enskilda Banken

Skandinaviska Enskilda Banken's Earnings Will Easily Cover The Distributions

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 53% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was SEK4.00, 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 11% over that duration. Skandinaviska Enskilda Banken has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. 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. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Skandinaviska Enskilda Banken's Dividend

Overall, we like to see the dividend staying consistent, and we think Skandinaviska Enskilda Banken might even raise payments in the future. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Skandinaviska Enskilda Banken has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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