Gjensidige Forsikring (OB:GJF) Has Announced That It Will Be Increasing Its Dividend To NOK10.00

Gjensidige Forsikring ASA (OB:GJF) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of March to NOK10.00. This takes the annual payment to 3.7% of the current stock price, which is about average for the industry.

See our latest analysis for Gjensidige Forsikring

Gjensidige Forsikring's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. At the time of the last dividend payment, Gjensidige Forsikring was paying out a very large proportion of what it was earning and 118% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 48.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Gjensidige Forsikring Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of NOK5.90 in 2015 to the most recent total annual payment of NOK9.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Gjensidige Forsikring's EPS has declined at around 5.1% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Gjensidige Forsikring's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Gjensidige Forsikring's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Gjensidige Forsikring 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.