Standard Bank Group (JSE:SBK) Is Paying Out A Larger Dividend Than Last Year

Standard Bank Group Limited (JSE:SBK) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of April to ZAR7.33. This will take the dividend yield to an attractive 7.6%, providing a nice boost to shareholder returns.

Check out our latest analysis for Standard Bank Group

Standard Bank Group'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.

Standard Bank Group has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Standard Bank Group's last earnings report, the payout ratio is at a decent 53%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 18.2% over the next 3 years. The future payout ratio could be 56% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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. The annual payment during the last 10 years was ZAR4.76 in 2014, and the most recent fiscal year payment was ZAR14.23. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Standard Bank Group 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.

Standard Bank Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Standard Bank Group has been growing its earnings per share at 9.1% a 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.

Standard Bank Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income 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. For instance, we've picked out 1 warning sign for Standard Bank Group that investors should take into consideration. 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.