Danske Bank (CPH:DANSKE) Has Announced That It Will Be Increasing Its Dividend To DKK14.70

The board of Danske Bank A/S (CPH:DANSKE) has announced that it will be paying its dividend of DKK14.70 on the 25th of March, an increased payment from last year's comparable dividend. This makes the dividend yield 7.7%, which is above the industry average.

Danske Bank's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Danske Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Danske Bank's last earnings report, the payout ratio is at a decent 60%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 0.03% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 64% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Danske Bank

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from DKK5.50 total annually to DKK18.70. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Danske Bank has impressed us by growing EPS at 11% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Danske Bank's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Danske Bank has been making. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Danske Bank (1 is concerning!) that you should be aware of before investing. Is Danske Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.