Banco Santander Maintains Dividend to Yield 9.6%

LONDON -- The shares of Banco Santander  (LSE: BNC  )   (NYSE: SAN  )  dropped 20 pence, or 4%, to 533 pence during early London trade this morning after the market took a skeptical view of the bank's 2012 results and maintained dividend.

Santander, which claims to serve 102 million customers throughout Europe, South America, Mexico and the United States, today announced it would declare a 0.60 euro per share annual payout for the third year running.

The dividend, equivalent to 52 pence per share, provides a 9.6% yield for current buyers.

Santander's dividend announcement accompanied full-year results that boasted pre-provision profits climbing 2% to 23 billion euro. However, the figures also revealed provisions for non-performing loans surging 28% to 13 billion euro, and a further 4 billion-euro write-off relating to Spanish property values.

The charges caused overall earnings to plunge 59% to 0.23 euro per share and leave the dividend uncovered.

Emilio Botin, Santander's chairman, said: "Profits reached a turning point in 2012. In 2013, with the exceptional write-offs behind us, we should see a marked increase in earnings, based on the group's recurrent revenues and cost control."

If Santander's financial performance of 2010 were to be repeated during 2013 -- that is, with loan provisions of 10 billion euro and no Spanish property write-offs -- then near-term earnings could rebound to 0.94 euro per share.

Such a recovery would put the shares on a possible P/E of less than 7.

Santander's latest balance sheet carried net assets of 80 billion euro, equivalent to roughly 7.87 euro, or 677 pence per share. The shares thus trade on a price to book ratio of 0.79.

Of course, whether Santander's write-offs, its valuation plus the general outlook for the banking sector all combine to make the share a buy remains up to you.

Still, certainly Santander's near-10% income looks tempting and is greater than the 3.5% currently on offer from the FTSE 100. But the market rarely offers such generous yields without risk.

Indeed, if you already own Santander shares, you may wish to read this exclusive in-depth report about a lower-risk income opportunity among Europe's large-caps.

You see, the blue chip in question offers a 5.7% income, its shares might be worth 21% more than their recent price -- and it has just been declared "The Motley Fool's Top Income Stock for 2013"! Just click here to download the report -- it's free.


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