DNB Bank's (OB:DNB) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of DNB Bank ASA (OB:DNB) has announced that it will be paying its dividend of NOK12.50 on the 5th of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 6.6%.

View our latest analysis for DNB Bank

DNB Bank's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Currently, DNB Bank does not yet have a history of paying dividends out, with this being its first year doing so. Based on DNB Bank's last earnings report, calculating for its payout ratio equates to 61%, 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 7.9%. Analysts estimate the future payout ratio will be 62% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

DNB Bank Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

We Could See DNB Bank's Dividend Growing

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 9.8% 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.

DNB Bank Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for DNB Bank that investors should take into consideration. Is DNB Bank 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.