Could Møns Bank A/S (CPH:MNBA) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the 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.
With a 1.4% yield and a eight-year payment history, investors probably think Møns Bank looks like a reliable dividend stock. A 1.4% yield is not inspiring, but the longer payment history has some appeal. Some simple research can reduce the risk of buying Møns Bank for its dividend - read on to learn more.
Click the interactive chart for our full dividend analysis
Payout ratios
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Møns Bank paid out 13% of its profit as dividends, over the trailing twelve month period. We'd say its dividends are thoroughly covered by earnings.
We update our data on Møns Bank every 24 hours, so you can always get our latest analysis of its financial health, here.
Dividend Volatility
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. The first recorded dividend for Møns Bank, in the last decade, was eight years ago. It's good to see that Møns Bank has been paying a dividend for a number of years. However, the dividend has been cut at least once in the past, and we're concerned that what has been cut once, could be cut again. Its most recent annual dividend was kr.2.0 per share, effectively flat on its first payment eight years ago.
It's good to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth, anyway. We're not that enthused by this.
Conclusion
To summarise, shareholders should always check that Møns Bank's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're glad to see Møns Bank has a low payout ratio, as this suggests earnings are being reinvested in the business. Unfortunately, the company has not been able to generate earnings growth, and cut its dividend at least once in the past. In summary, we're unenthused by Møns Bank as a dividend stock. It's not that we think it is a bad company; it simply falls short of our criteria in some key areas.
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. As an example, we've identified 2 warning signs for Møns Bank that you should be aware of before investing.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield 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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About CPSE:MNBA
Møns Bank
Provides banking products and services to private, business, and association customers.
Solid track record and good value.
