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Can you count on Standard Chartered's (LON:STAN) dividend payment?

12th Aug by Jack Brumby

Standard Chartered (LON:STANis a global banking giant whose segments include Corporate & Institutional Banking, Retail Banking, Commercial Banking and Private Banking. In today's world of low interest rates though, global banking is a much riskier industry for investors. Because of this, I'd like to see how safe the group's dividend is.

One of the quickest ways to kick the tires on your current dividend generators is to check the dividend cover (earnings per share divided by dividend per share). Dividend cover is the inverse of the dividend payout ratio. Dividend cover of two times or above is strong. Anything below one and a half times - as is the case for Standard Chartered PLC - should be stirring us to investigate in more detail.


Calculating Standard Chartered’s dividend cover ratio 

A low level of dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It happens all the time. With that in mind, let’s take a look at Standard Chartered’s dividend cover.

We can get all the information we need to see if Standard Chartered has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve-month earnings per share is 19p and its trailing twelve-month dividend per share is 21p. 

Divide the former by the latter and we get a trailing twelve-month dividend cover for Standard Chartered of 0.88. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

Income investing: what you need to know

For many investors, dividends are a vital part of their long-term strategy. That's why we have created a variety of income-focused stock screens, such as the Best Dividends Screen, to identify promising candidates for income portfolios. Take a look and see if any of the qualifying stocks might be worthy of further research.

As for Standard Chartered (LON:STAN), you can find a wealth of financial data on the group's StockReport, including information on the group's past and forecast dividend payments. If you’d like to discover more about dividend investing, you can read our free ebook: How to Make Money in Dividend Stocks.

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