Swedbank (STO:SWED A) Has Announced That It Will Be Increasing Its Dividend To SEK15.15

The board of Swedbank AB (publ) (STO:SWED A) has announced that it will be paying its dividend of SEK15.15 on the 4th of April, an increased payment from last year's comparable dividend. This will take the annual payment to 7.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Swedbank

Swedbank's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Swedbank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Swedbank's last earnings report, the payout ratio is at a decent 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 12.9% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 71% 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 2014, the dividend has gone from SEK10.10 total annually to SEK15.15. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

We Could See Swedbank's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Swedbank has been growing its earnings per share at 9.9% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Swedbank's Dividend

Overall, a dividend increase is always good, and we think that Swedbank is a strong income stock thanks to its track record and growing earnings. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Swedbank (of which 1 is concerning!) 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.

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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.