Skandinaviska Enskilda Banken (STO:SEB A) Is Paying Out 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. Based on this payment, the dividend yield on the company's stock will be 6.9%, which is an attractive boost to shareholder returns.

View our latest analysis for Skandinaviska Enskilda Banken

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

While it is great to have a strong dividend yield, we should also consider whether the payment is 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 3.5% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 54% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SEK4.00 in 2015, and the most recent fiscal year payment was SEK11.50. This means that it has been growing its distributions at 11% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Skandinaviska Enskilda Banken has impressed us by growing EPS at 14% per 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.

Skandinaviska Enskilda Banken Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Skandinaviska Enskilda Banken might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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 of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.