DNB Bank (OB:DNB) Will Pay A Larger Dividend Than Last Year At NOK16.00

The board of DNB Bank ASA (OB:DNB) has announced that it will be paying its dividend of NOK16.00 on the 8th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 7.8%, which is above the industry average.

Check out our latest analysis for DNB Bank

DNB Bank's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

DNB Bank has a short history of paying out dividends, with its current track record at only 2 years. Based on DNB Bank's last earnings report, calculating for its payout ratio equates to 64%, which means that the company covered its last dividend with comfortable room to spare.

EPS is set to fall by 7.8% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 72% 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 2 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of NOK9.75 in 2022 to the most recent total annual payment of NOK16.00. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. It's encouraging to see that DNB Bank has been growing its earnings per share at 12% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think DNB Bank will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for DNB Bank you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.