Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Avanza Bank Holding AB (publ) (STO:AZA) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 18th of March in order to be eligible for this dividend, which will be paid on the 24th of March.

Avanza Bank Holding's next dividend payment will be kr2.30 per share. Last year, in total, the company distributed kr2.30 to shareholders. Looking at the last 12 months of distributions, Avanza Bank Holding has a trailing yield of approximately 2.9% on its current stock price of SEK78.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Avanza Bank Holding can afford its dividend, and if the dividend could grow.

View our latest analysis for Avanza Bank Holding

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Avanza Bank Holding's earnings per share have risen 11% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, Avanza Bank Holding has lifted its dividend by approximately 6.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Avanza Bank Holding worth buying for its dividend? Avanza Bank Holding has an acceptable payout ratio and its earnings per share have been improving at a decent rate. We think this is a pretty attractive combination, and would be interested in investigating Avanza Bank Holding more closely.