DNB Bank (OB:DNB) Is Increasing Its Dividend To NOK16.75

DNB Bank ASA (OB:DNB) will increase its dividend from last year's comparable payment on the 9th of May to NOK16.75. Based on this payment, the dividend yield for the company will be 6.4%, which is fairly typical for the industry.

Check out our latest analysis for DNB Bank

DNB Bank's Payment Expected To Have Solid Earnings Coverage

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

DNB Bank has a short history of paying out dividends, with its current track record at only 3 years. Taking data from DNB Bank's last earnings report, the payout ratio is at a decent 57%, meaning that the company is able to pay out its dividend with some room to spare.

Looking forward, earnings per share is forecast to fall by 11.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 68% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

DNB Bank Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was NOK9.75 in 2022, and the most recent fiscal year payment was NOK16.75. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. DNB Bank has seen EPS rising for the last five years, at 14% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like DNB Bank's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for DNB Bank 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.