DNB Bank's (OB:DNB) Upcoming Dividend Will Be Larger Than Last Year's

DNB Bank ASA's (OB:DNB) dividend will be increasing from last year's payment of the same period to NOK16.75 on 9th of May. The payment will take the dividend yield to 6.4%, which is in line with the average for the industry.

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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.

Looking forward, earnings per share is forecast to fall by 10.1% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 67% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for DNB Bank

DNB Bank Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the dividend has gone from NOK9.75 total annually to NOK16.75. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year 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

Investors could be attracted to the stock based on the quality of its payment history. DNB Bank has impressed us by growing EPS at 14% 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.

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. All of these factors considered, we think this has solid potential as a dividend stock.

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. As an example, we've identified 1 warning sign for DNB Bank that you should be aware of before investing. 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.