Nordfyns Bank (CPH:NRDF) Has Announced That Its Dividend Will Be Reduced To DKK13.00

Nordfyns Bank A/S' (CPH:NRDF) dividend is being reduced from last year's payment covering the same period to DKK13.00 on the 31st of March. This means that the dividend yield is 3.8%, which is a bit low when comparing to other companies in the industry.

Nordfyns Bank's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Nordfyns Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Nordfyns Bank's latest earnings report puts its payout ratio at 24%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share could rise by 15.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Nordfyns 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 DKK3.00 total annually to DKK13.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Nordfyns Bank has impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nordfyns Bank's prospects of growing its dividend payments in the future.

Nordfyns Bank Looks Like A Great Dividend Stock

Overall, we think that Nordfyns Bank could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Nordfyns Bank that investors need to be conscious of moving forward. Is Nordfyns 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.