Banco Santander, S.A. (NYSE:SAN)’s Dividend Is Sustainable

Page 1 of 2

I highly recommend the article on Emilio Botin, the Chairman of Banco Santander, S.A. (NYSE:SAN), published by the Financial Times last weekend. The article told the story of how Botin made himself into one of the most powerful individuals in Spain and one of Europe’s most influential bankers. The article states that the bank is sustaining its huge +9.5% cash dividend (although that represents an expected 2013 116% payout ratio) because Botin’s family and their friends finance their lifestyle though SAN’s dividend. My theory is quite different from FT’s. I think Botin and the rest of the Board are clearly trying to give stability to SAN’s payout policy because they understand that the bank should be an income machine for its owners. Botin believes the bank can go through Europe’s recession without having to lower its dividend in a significant way and he is going to make every effort to sustain what he thinks should be the bank’s final end. I couldn’t agree more. Not many banks are run for their shareholders. SAN is a healthy example and I believe Botin when he says that the bank is over the worst.

Banco Santander, S.A. (ADR) (NYSE:SAN)I just bought 500 shares of SAN at $8.22 because I think there is considerable upside potential in the mid-term even if some problems lie ahead. Of course, there is some cause for concern, such as the non-performing loans in Spain that continue to creep up – from 4.2 per cent of the book two years ago to 6.7 per cent right now – or Brazil’s earnings that fell by a tenth. That said, SAN’s income diversification (Latin America generates 50% of attributable profits) and its 10.3% core capital ratio give me some tranquility. I rather have SAN to its main Spanish competitor, Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), since BBVA is more concentrated in the Spanish market. It’s true that BBVA trades at a 15% discount to tangible book compared to SAN and it has a similar core capital ratio (10.7%), but pays a lower dividend and is less strong in Latin America and the UK (where SAN generates over 13% of its profits).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!