GrønlandsBANKEN (CPH:GRLA) Is Increasing Its Dividend To kr.40.00

The board of GrønlandsBANKEN A/S (CPH:GRLA) has announced that it will be increasing its dividend by 60% on the 1st of April to kr.40.00. This takes the annual payment to 6.4% of the current stock price, which is about average for the industry.

Check out our latest analysis for GrønlandsBANKEN

GrønlandsBANKEN's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, GrønlandsBANKEN was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 11.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the first annual payment was kr.30.00, compared to the most recent full-year payment of kr.25.00. This works out to be a decline of approximately 1.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see GrønlandsBANKEN has been growing its earnings per share at 11% a year over the past five years. GrønlandsBANKEN definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

GrønlandsBANKEN Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that GrønlandsBANKEN is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for GrønlandsBANKEN that investors should know about before committing capital to this stock. Is GrønlandsBANKEN 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.