57 Reasons Why Banco Santander SA Is A Spectacular Buy

Royston Wild looks at why Banco Santander SA (LON: BNC) should be on the radar of income seekers.

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In this article I am explaining why Banco Santander (LSE: BNC) (NYSE: SAN.US) is a lucrative dividend selection.

Smashing dividend yields on the board

Despite the effect of heavy double-digit earnings declines in recent years, Santander has remained a stock market favourite due to its blockbuster dividend profile. And according to current City consensus, the banking goliath is expected to maintain this reputation by shelling out a dividend of 57 euro cents per share this year, in turn smashing the rest of the banking sector’s payout prospects.

Indeed, Santander’s predicted payout for 2014 creates a gargantuan 7.5% yield — this reading not only takes out a forward average of 3.2% for the complete banking space, but a reading of 3.3% for the FTSE 100 is also comfortably surpassed.

This year’s predicted payment represents a slight cut from the 60 cent per share dividend seen in 2013, however, with the bank widely Santanderanticipated to correlate future rewards more closely with earnings performance.

As a consequence, Santander is predicted to cut the dividend once again in 2015, to 50.5 cents. However, this projection still generates a massive 6.6% yield.

Although the economic recovery in Europe remains sluggish at best, particularly in the Spanish bank’s home country, Santander is expecting conditions on the continent to continue to improve — a promising sign for future payouts — and as highlighted by the purchase of GE Capital’s consumer finance business in Scandinavia last week.

The €700m deal will give the bank improved geographical diversification in Europe — the country only sources a fraction of total profits from Denmark, Norway and Sweden — as well as boosting its already-mighty consumer finance operations by giving it access to 1.2 million extra customers. The deal also enhances Santander’s exposure to AAA-rated nations, a crucial factor given the still-fragile state of mainland Europe’s finances.

With the company’s European markets seemingly on the mend, the bank is expected to follow last year’s 74% earnings improvement with increases of 23% and 20% in 2014 and 2015 correspondingly.

News in recent weeks that ratings agency Standard & Poor’s had upgraded Spanish sovereign debt one notch to BBB+ provides further evidence that the worst of the 2008/2009 financial crisis is finally behind the bank. And with the company’s sprawling operations across Latin America also promising to ratchet up long-term earnings growth, in my opinion Santander is in great shape to continue forking out delectable dividends to its shareholders.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Royston does not own shares in Banco Santander SA.

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