Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Skjern Bank A/S (CPH:SKJE) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 3rd of March to receive the dividend, which will be paid on the 5th of March.
Skjern Bank’s next dividend payment will be ø3.00 per share, on the back of last year when the company paid a total of ø3.00 to shareholders. Looking at the last 12 months of distributions, Skjern Bank has a trailing yield of approximately 4.4% on its current stock price of DKK67.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Skjern Bank can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Skjern Bank
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Skjern Bank is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see how much of its profit Skjern Bank paid out over the last 12 months.
CPSE:SKJE Historical Dividend Yield, February 27th 2020
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Skjern Bank’s earnings have been skyrocketing, up 42% per annum for the past five years.
Given that Skjern Bank has only been paying a dividend for a year, there’s not much of a past history to draw insight from.
The Bottom Line
Should investors buy Skjern Bank for the upcoming dividend? Companies like Skjern Bank that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Skjern Bank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Curious about whether Skjern Bank has been able to consistently generate growth? Here’s a chart of its historical revenue and earnings growth.
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 editorial-team@simplywallst.com. 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.
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