Assessing the Sustainability and Growth of Banco de Sabadell SA's Dividends
Banco de Sabadell SA (BNDSF, Financial) recently announced a dividend of $0.03 per share, payable on 2023-12-29, with the ex-dividend date set for 2023-12-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Banco de Sabadell SA's dividend performance and assess its sustainability.
What Does Banco de Sabadell SA Do?
Banco de Sabadell SA is a Spanish retail and commercial bank operating mostly in Spain, but with a notable lending presence in the United Kingdom and the Americas. Its strategy emphasizes scaling its current customer base and laying the foundation for international expansion. Banco de Sabadell's largest business line is commercial banking, which focuses on providing financial products and services to large corporations, small to medium-size enterprises, retailers and sole proprietors, professional groupings, entrepreneurs, and personal customers. Loans and advances constitute a majority of the bank's earning assets. Its credit risk is mostly exposed to mortgage loans, followed by sovereign debt.
A Glimpse at Banco de Sabadell SA's Dividend History
Banco de Sabadell SA has maintained a consistent dividend payment record since 2022, with dividends currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Banco de Sabadell SA's Dividend Yield and Growth
As of today, Banco de Sabadell SA currently has a 12-month trailing dividend yield of 3.59% and a 12-month forward dividend yield of 4.46%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Banco de Sabadell SA's annual dividend growth rate was 18.60%. Based on Banco de Sabadell SA's dividend yield and five-year growth rate, the 5-year yield on cost of Banco de Sabadell SA stock as of today is approximately 3.59%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Banco de Sabadell SA's dividend payout ratio is 0.20. Banco de Sabadell SA's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Banco de Sabadell SA's profitability 4 out of 10 as of 2023-09-30, suggesting the dividend may not be sustainable. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Banco de Sabadell SA's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable. Revenue is the lifeblood of any company, and Banco de Sabadell SA's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Banco de Sabadell SA's revenue has increased by approximately -0.10% per year on average, a rate that underperforms than approximately 82% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Banco de Sabadell SA's earnings increased by approximately 3.70% per year on average, a rate that underperforms than approximately 66.74% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -7.90%, which underperforms than approximately 91.54% of global competitors.
Next Steps
In conclusion, while Banco de Sabadell SA has demonstrated a commitment to providing shareholders with dividends, the company's moderate profitability rank and underwhelming growth metrics raise questions about the long-term sustainability of its dividend growth. The bank's prudent payout ratio, however, provides some reassurance that it is managing its dividend policy with an eye towards future stability. Investors considering Banco de Sabadell SA for its dividend potential should also weigh these qualitative factors and keep an eye on the company's strategic initiatives and competitive position within the banking sector. Will Banco de Sabadell SA's dividends continue to provide value to shareholders in the years to come? Only time will tell, but the data provided by GuruFocus will be instrumental in monitoring the bank's financial health and dividend prospects.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
