Sparebanken Møre (OB:MORG) Has Announced That Its Dividend Will Be Reduced To NOK6.25

Sparebanken Møre (OB:MORG) has announced that on 23rd of April, it will be paying a dividend ofNOK6.25, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 5.9% will still be comparable to other companies in the industry.

View our latest analysis for Sparebanken Møre

Sparebanken Møre's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, Sparebanken Møre has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Sparebanken Møre's payout ratio of 63% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 2.5% over the next 3 years. However, analysts forecast that the future payout ratio could reach 81% over the same time period. This is definitely on the higher side of what we consider sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was NOK1.60 in 2015, and the most recent fiscal year payment was NOK6.25. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Sparebanken Møre has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Sparebanken Møre's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sparebanken Møre has seen EPS rising for the last five years, at 7.9% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, we think that Sparebanken Møre could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Sparebanken Møre that investors need to be conscious of moving forward. 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.