NatWest Group (LON:NWG) Is Paying Out A Larger Dividend Than Last Year

NatWest Group plc (LON:NWG) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of April to £0.155. Despite this raise, the dividend yield of 4.5% is only a modest boost to shareholder returns.

Check out our latest analysis for NatWest Group

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.

NatWest Group has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Based on NatWest Group's last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 18.3%. Analysts forecast the future payout ratio could be 46% over the same time horizon, which is a number we think the company can maintain.

NatWest Group's Dividend Has Lacked Consistency

Looking back, NatWest Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was £0.0431, compared to the most recent full-year payment of £0.215. This means that it has been growing its distributions at 26% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. NatWest Group has seen EPS rising for the last five years, at 17% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

NatWest Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that NatWest Group is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for NatWest Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.