Standard Bank Group's (JSE:SBK) Dividend Will Be Increased To ZAR5.15

Standard Bank Group Limited's (JSE:SBK) dividend will be increasing from last year's payment of the same period to ZAR5.15 on 19th of September. This makes the dividend yield 6.5%, which is above the industry average.

Check out our latest analysis for Standard Bank Group

Standard Bank Group's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Standard Bank Group 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 57%, which means that Standard Bank Group would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 33.7% over the next 3 years. Analysts forecast the future payout ratio could be 57% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ZAR4.25 in 2012, and the most recent fiscal year payment was ZAR10.30. This means that it has been growing its distributions at 9.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Standard Bank Group might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Standard Bank Group is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Standard Bank Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Standard Bank Group that investors need to be conscious of moving forward. Is Standard Bank Group not quite the opportunity you were looking for? Why not check out our selection of top 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.