A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Sparebank 1 Nordvest (OB:SNOR) has started paying a dividend to shareholders. It currently trades on a yield of 5.5%. Does Sparebank 1 Nordvest tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Sparebank 1 Nordvest fare?
Sparebank 1 Nordvest has a trailing twelve-month payout ratio of 58%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 77% which, assuming the share price stays the same, leads to a dividend yield of around 7.0%. Moreover, EPS should increase to NOK11.61. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Sparebank 1 Nordvest as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether SNOR one as a stable dividend player.
Compared to its peers, Sparebank 1 Nordvest generates a yield of 5.5%, which is high for Banks stocks but still below the market’s top dividend payers.
If you are building an income portfolio, then Sparebank 1 Nordvest is a complicated choice since it has some positive aspects as well as negative ones. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SNOR’s future growth? Take a look at our free research report of analyst consensus for SNOR’s outlook.
- Valuation: What is SNOR 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 SNOR 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 firstname.lastname@example.org. 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.