Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Gjensidige Forsikring ASA (OB:GJF) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Gjensidige Forsikring's shares on or after the 25th of March, you won't be eligible to receive the dividend, when it is paid on the 6th of April.
The company's upcoming dividend is kr7.70 a share, following on from the last 12 months, when the company distributed a total of kr7.70 per share to shareholders. Looking at the last 12 months of distributions, Gjensidige Forsikring has a trailing yield of approximately 3.4% on its current stock price of NOK224.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Gjensidige Forsikring paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Gjensidige Forsikring, with earnings per share up 8.9% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gjensidige Forsikring has delivered 5.4% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Gjensidige Forsikring got what it takes to maintain its dividend payments? Gjensidige Forsikring has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.
With that being said, if dividends aren't your biggest concern with Gjensidige Forsikring, you should know about the other risks facing this business. We've identified 2 warning signs with Gjensidige Forsikring (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.