Be Sure To Check Out Swedbank AB (publ) (STO:SWED A) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Swedbank AB (publ) (STO:SWED A) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Swedbank's shares on or after the 27th of March, you won't be eligible to receive the dividend, when it is paid on the 2nd of April.

The company's upcoming dividend is kr021.70 a share, following on from the last 12 months, when the company distributed a total of kr21.70 per share to shareholders. Calculating the last year's worth of payments shows that Swedbank has a trailing yield of 8.3% on the current share price of kr0259.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Swedbank paid out more than half (70%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for Swedbank

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Swedbank's earnings per share have been growing at 12% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Swedbank has increased its dividend at approximately 6.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Swedbank for the upcoming dividend? Swedbank has an acceptable payout ratio and its earnings per share have been improving at a decent rate. We think this is a pretty attractive combination, and would be interested in investigating Swedbank more closely.

In light of that, while Swedbank has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Swedbank (1 shouldn't be ignored) you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.