NatWest Group (LON:NWG) Has Announced A Dividend Of £0.095

The board of NatWest Group plc (LON:NWG) has announced that it will pay a dividend on the 12th of September, with investors receiving £0.095 per share. This takes the annual payment to 4.1% of the current stock price, which unfortunately is below what the industry is paying.

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NatWest Group's Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having paid out dividends for 7 years, NatWest Group has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but NatWest Group's payout ratio of 42% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 0.08%. The future payout ratio could be 47% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for NatWest Group

NatWest Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from £0.0431 total annually to £0.215. This means that it has been growing its distributions at 26% per annum over that time. NatWest Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that NatWest Group has been growing its earnings per share at 77% a year over the past five years. NatWest Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

NatWest Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for NatWest Group that investors need to be conscious of moving forward. Is NatWest Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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