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

DNB Bank ASA's (OB:DNB) dividend will be increasing from last year's payment of the same period to NOK16.00 on 8th of May. This will take the annual payment to 7.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for DNB Bank

DNB Bank's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

DNB Bank has a short history of paying out dividends, with its current track record at only 2 years. 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.

Over the next 3 years, EPS is forecast to fall by 7.7%. Fortunately, analysts forecast the future payout ratio to be 69% 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

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the annual payment back then was NOK9.75, compared to the most recent full-year payment of NOK16.00. This means that it has been growing its distributions at 28% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

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 impressed us by growing EPS at 12% per year over the past five years. 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.

Our Thoughts On DNB Bank's Dividend

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for DNB Bank (1 is 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.