NatWest Group (LON:NWG) Will Pay A Larger Dividend Than Last Year At £0.035

NatWest Group plc (LON:NWG) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of September to £0.035. This takes the annual payment to 6.0% of the current stock price, which is about average for the industry.

See our latest analysis for NatWest Group

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

NatWest Group is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Based on NatWest Group's last earnings report, calculating for its payout ratio equates to 32%, which means that the company covered its last dividend with comfortable room to spare.

The next 3 years are set to see EPS grow by 53.1%. The future payout ratio could be 37% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

NatWest Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2018, the dividend has gone from £0.04 total annually to £0.15. This works out to be a compound annual growth rate (CAGR) of approximately 39% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. NatWest Group has seen EPS rising for the last five years, at 36% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like NatWest Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. 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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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.