How Does Banco de Sabadell SA (BME:SAB) Fare As A Dividend Stock?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Banco de Sabadell SA (BME:SAB) has paid a dividend to shareholders. It currently yields 6.7%. Does Banco de Sabadell tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Banco de Sabadell
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
How well does Banco de Sabadell fit our criteria?
The current trailing twelve-month payout ratio for the stock is 62%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 48%, leading to a dividend yield of around 6.8%. However, EPS should increase to €0.12, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Banco de Sabadell fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, Banco de Sabadell generates a yield of 6.7%, which is high for Banks stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Banco de Sabadell is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for SAB’s future growth? Take a look at our free research report of analyst consensus for SAB’s outlook.
Valuation: What is SAB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SAB is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
