Topdanmark's (CPH:TOP) Shareholders Will Receive A Bigger Dividend Than Last Year

Topdanmark A/S' (CPH:TOP) dividend will be increasing to kr.34.50 on 29th of March. This will take the dividend yield from 3.0% to 9.1%, providing a nice boost to shareholder returns.

View our latest analysis for Topdanmark

Topdanmark Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Topdanmark's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 26.3%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 154%, which is definitely a bit high to be sustainable going forward.

Topdanmark's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the dividend has gone from kr.19.00 to kr.11.50. The dividend has fallen 39% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Topdanmark Could Grow Its Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see Topdanmark has been growing its earnings per share at 7.7% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Topdanmark has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.