Sparebanken Møre's (OB:MORG) Upcoming Dividend Will Be Larger Than Last Year's

Sparebanken Møre's (OB:MORG) dividend will be increasing from last year's payment of the same period to NOK7.50 on 12th of April. This takes the dividend yield to 8.2%, which shareholders will be pleased with.

Check out our latest analysis for Sparebanken Møre

Sparebanken Møre'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.

Sparebanken Møre has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Sparebanken Møre's last earnings report, the payout ratio is at a decent 74%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 6.8%. However, as estimated by analysts, the future payout ratio could be 65% over the same time period, which we think the company can easily maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from NOK1.60 total annually to NOK7.50. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sparebanken Møre has been growing its earnings per share at 11% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Sparebanken Møre is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Sparebanken Møre is a great stock to add to your portfolio if income is your focus.

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. 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.