Banque nationale de Belgique Société anonyme's (EBR:BNB) Attractive Combination: Does It Earn A Place In Your Dividend Portfolio?

Dividend paying stocks like Banque nationale de Belgique Société anonyme (EBR:BNB) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Yet sometimes, investors buy a popular dividend stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

A high yield and a long history of paying dividends is an appealing combination for Banque nationale de Belgique Société anonyme. It would not be a surprise to discover that many investors buy it for the dividends. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

Click the interactive chart for our full dividend analysis

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Banque nationale de Belgique Société anonyme paid out 5.9% of its profit as dividends, over the trailing twelve month period. We'd say its dividends are thoroughly covered by earnings.

Consider getting our latest analysis on Banque nationale de Belgique Société anonyme's financial position here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. Banque nationale de Belgique Société anonyme has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was €126 in 2010, compared to €123 last year. The dividend has shrunk at a rate of less than 1% a year over this period.

When a company's per-share dividend falls we question if this reflects poorly on either external business conditions, or the company's capital allocation decisions. Either way, we find it hard to get excited about a company with a declining dividend.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Banque nationale de Belgique Société anonyme has grown its earnings per share at 4.0% per annum over the past five years. So, we know earnings growth has been thin on the ground. However, at least the payout ratio is conservative, and there is plenty of potential to increase this over time.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Firstly, we like that Banque nationale de Belgique Société anonyme has a low and conservative payout ratio. Earnings per share growth has been slow, but we respect a company that maintains a relatively stable dividend. Banque nationale de Belgique Société anonyme has a credible record on several fronts, but falls slightly short of our standards for a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Banque nationale de Belgique Société anonyme that investors need to be conscious of moving forward.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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