Important news for shareholders and potential investors in DNB ASA (OB:DNB): The dividend payment of øre8.25 per share will be distributed to shareholders on 10 May 2019, and the stock will begin trading ex-dividend at an earlier date, 02 May 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at DNB’s most recent financial data to examine its dividend characteristics in more detail.
View our latest analysis for DNB
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does DNB fare?
DNB has a trailing twelve-month payout ratio of 56%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 60% which, assuming the share price stays the same, leads to a dividend yield of 5.6%. Furthermore, EPS should increase to NOK16.12.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider DNB as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, DNB has a yield of 4.9%, which is high for Banks stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, DNB is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for DNB’s future growth? Take a look at our free research report of analyst consensus for DNB’s outlook.
- Valuation: What is DNB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DNB is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.