Seekingalpha article 2013/12/03

Link is here EN

That is a really weak article:

"Is The 7% Dividend Sustainable"
How does he compute 7%? DY are computed gross, and taking new shares, gross equals net.

"it was hit particularly hard as millions of dollars of mortgage loans went"
Spanish crisis hart is in companies with real estate purpose (NPL in the range of 50% and 30% mandatory provisions on the performing other 50%) not mortgage as was in the US.

"Santander has largely been maintaining or raising its dividend, pushing the yield up to its current level"
Wrong. Santander has cut its dividend from €0.65 (2008) to €0.60 (since 2009)

"In assessing the sustainability of the current dividend, it's worth noting that a dividend cut is not unprecedented for Santander. As the mortgage market started melting down, Santander cut its dividend from $0.36 per share down to $0.15 in order to preserve cash for ongoing operations. But is a similar situation ahead for the bank"
Where does he get that?

"2013 earnings are expected to come in somewhere around $0.60 per share. When compared to the current annual dividend payout of $0.6"
2013 dividend will be €0.6. Does he understand the difference between € and $?

"The primary advantage to Santander is that it allows the company to maintain its cash position"
Wrong. The main advantage of the dividend script is that it allows Santander to increase capital.  And this without making new rights issue at discounted price. In fact the current shareholders are given the money to participate, tax free, and if they don't want they can simply sell the new shares.

And once again an article missing the recent €12-13bi in capital boost Santander got through the new DTA regulation.
That news is the single most important news related to Santander since July 2012. It is a major element in dividend sustainability as it either allows shares repurchase either (but not exclusive) provides capital for significant growth (organic or through M&A or both). The 2nd major element about dividend sustainability is future EPS; Have a look at "Guidance" tab for that. The 3rd major element will be in 2014: RWA regulations due to EZ banking union. Have a look at "Capital" tab for that.

Blinking F

There is an interesting comment:

"Shouldn't cash flow be studied rather than earnings as an indicator of dividend sustainability?"

That does not work for banks because the product they buy and sell is money. The variations in working capital are in the cash flow. markets.ft.com or google finances provide cash flow for Santander (EN).
2010: operating cash flow of €52bi, 2011: 36bi, €2012: €24bi.

Better with an example: Say bank X has $2000bi in deposits and $900bi in loans. That means they have accumulated a free cash flow of $1100bi from variation of working capital only. Does this mean they can distribute a $1100bi dividend or start a $1100bi share repurchase program? Technically yes (they have the money), but regulations prohibit that, and with reason. This is controlled though capital ratio and EPS comes there.
Now that bank X has $1100bi cash they cannot give to shareholders, but can use them for own trading, or control some raw materials, because that is a lot of money. Of course this is somewhat risky, and investors (in that case depositors) would ask a corresponding return. But nicely for bank X, the deposits are insured by the governments, so that they don't need to pay high return.
Not good and makes the financial system unstable? Here come the lobbies.