January 18, 2022

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We Wouldn’t Be Too Quick To Buy Sunndal Sparebank (OB:SUNSB-ME) Before It Goes Ex-Dividend

Sunndal Sparebank (OB:SUNSB-ME) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 27th of March to receive the dividend, which will be paid on the 7th of April.

Sunndal Sparebank’s next dividend payment will be kr8.00 per share, which looks like a nice increase on last year, when the company distributed a total of kr7.50 to shareholders. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.

Check out our latest analysis for Sunndal Sparebank

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. Sunndal Sparebank paid out 97% of its earnings, which is more than we’re comfortable with, unless there are mitigating circumstances.

Generally, the higher a company’s payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit Sunndal Sparebank paid out over the last 12 months.

OB:SUNSB-ME Historical Dividend Yield, March 23rd 2020

Have Earnings And Dividends Been Growing?

Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. To our modest chagrin, Sunndal Sparebank earnings per share have been effectively flat over the past year. The best dividend stocks all grow their earnings per share over the long run, but it is hard to draw strong conclusions from any one year period.

Unfortunately Sunndal Sparebank has only been paying a dividend for a year or so, so there’s not much of a history to draw insight from.

Final Takeaway

Has Sunndal Sparebank got what it takes to maintain its dividend payments? Earnings per share have not grown at all and Sunndal Sparebank is paying out an uncomfortably high percentage of its profit as dividends. Sunndal Sparebank doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Sunndal Sparebank don’t faze you, it’s worth being mindful of the risks involved with this business. For example, we’ve found 2 warning signs for Sunndal Sparebank that we recommend you consider before investing in the business.

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at [email protected] This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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