Yahoo Finance Secure Trust Bank's (LON:STB) Shareholders Will Receive A Smaller Dividend Than Last Year
Secure Trust Bank PLC (LON:STB) has announced that on 25th of May, it will be paying a dividend of£0.291, which a reduction from last year's comparable dividend. The dividend yield of 6.7% is still a nice boost to shareholder returns, despite the cut.
Check out our latest analysis for Secure Trust Bank
Secure Trust Bank's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Having distributed dividends for at least 10 years, Secure Trust Bank 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 28%, which means that Secure Trust Bank would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 28.1%. Analysts forecast the future payout ratio could be 25% over the same time horizon, which is a number we think the company can maintain.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was £0.28, compared to the most recent full-year payment of £0.451. This means that it has been growing its distributions at 4.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Secure Trust Bank Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Secure Trust Bank has impressed us by growing EPS at 8.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Secure Trust Bank Looks Like A Great Dividend Stock
In general, we don't like to see the dividend being cut, especially when the company has such high potential like Secure Trust Bank does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Secure Trust Bank (of which 1 is a bit concerning!) you should know about. Is Secure Trust Bank 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.
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