Romerike Sparebank (OB:ROMER) Has Announced That It Will Be Increasing Its Dividend To kr8.40

Romerike Sparebank (OB:ROMER) has announced that it will be increasing its dividend on the 8th of April to kr8.40, which will be 14% higher than last year. The announced payment will take the dividend yield to 4.6%, which is in line with the average for the industry.

See our latest analysis for Romerike Sparebank

Romerike Sparebank's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Romerike Sparebank was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 88.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 93%, which is definitely on the higher side.

Romerike Sparebank 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 2018, the dividend has gone from kr8.54 to kr7.40. The dividend has shrunk at around 3.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Romerike Sparebank has impressed us by growing EPS at 19% per year over the past three years. Romerike Sparebank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Romerike Sparebank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Romerike Sparebank 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. 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 Romerike Sparebank that you should be aware of before investing. Is Romerike Sparebank not quite the opportunity you were looking for? Why not check out our selection of top 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.