Nidaros Sparebank's (OB:NISB) Upcoming Dividend Will Be Larger Than Last Year's

Nidaros Sparebank (OB:NISB) has announced that it will be increasing its periodic dividend on the 3rd of April to NOK5.87, which will be 3.5% higher than last year's comparable payment amount of NOK5.67. This takes the annual payment to 5.0% of the current stock price, which is about average for the industry.

View our latest analysis for Nidaros Sparebank

Nidaros Sparebank's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Nidaros Sparebank has a good history of paying out dividends, with its current track record at 5 years. Taking data from its last earnings report, calculating for the company's payout ratio of 89%shows that Nidaros Sparebank would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to grow by 70.2% over the next year if recent trends continue. Estimates from analysts also put the future payout ratio of the company at 84% in the next 3 years, which is on the higher side, but certainly still feasible.

Nidaros Sparebank's Dividend Has Lacked Consistency

Looking back, Nidaros Sparebank's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of NOK5.51 in 2020 to the most recent total annual payment of NOK5.67. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Nidaros Sparebank Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nidaros Sparebank has seen EPS rising for the last three years, at 70% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Nidaros Sparebank will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Nidaros Sparebank 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.