Is Standard Chartered's (LON:STAN) dividend payment in trouble?

Perhaps the most obvious way to check dividend safety is dividend cover (earnings per share divided by dividend per share). Cover of two times or above is strong, but anything below one and a half times - as is the case for Standard Chartered (LON:STAN) - should be stirring us to investigate in more detail.

Standard Chartered PLC is an international banking company whose segments include Corporate & Institutional Banking, Retail Banking, Commercial Banking and Private Banking. For the fiscal year ended 31 December 2018, Standard Chartered PLC interest income increased 20% to $17.26B and net interest income after loan loss provision increased 19% to $8.14B.

Standard Chartered's shares trade on a rolling P/E ratio of 20.0, although this is expected to fall to 9.58  as group profit is forecast to more than double in FY19. The group pays out a 2.89% rolling dividend yield but Standard Chartered has been falling out of favour with investors if its -19.2% relative strength performance is anything to go by.

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 (LON:STAN) 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 0.90. 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.

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