DNB Bank (OB:DNB) Is Paying Out A Larger Dividend Than Last Year

The board of DNB Bank ASA (OB:DNB) has announced that it will be paying its dividend of NOK16.75 on the 9th of May, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 7.0%, which is in line with the average for the industry.

See our latest analysis for DNB Bank

DNB Bank's Earnings Will Easily Cover The Distributions

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.

Over the next 3 years, EPS is forecast to fall by 10.8%. Despite that, analysts estimate the future payout ratio could be 69% over the same time period, which is in a pretty comfortable range.

DNB Bank Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of NOK9.75 in 2022 to the most recent total annual payment of NOK16.75. This means that it has been growing its distributions at 20% per annum over that time. DNB Bank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. DNB Bank has seen EPS rising for the last five years, at 14% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

DNB Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that DNB Bank is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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.

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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.