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 7.4%, 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 is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 64%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

EPS is set to fall by 7.0% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 69% over the same time period, which we think the company can easily maintain.

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 annual payment during the last 2 years was NOK9.75 in 2022, and the most recent fiscal year payment was NOK16.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. 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

The company's investors will be pleased to have been receiving dividend income for some time. DNB Bank has seen EPS rising for the last five years, at 12% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think DNB Bank's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments DNB Bank has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for DNB Bank (1 is a bit concerning!) 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.